JUDGMENT OF 24. 10. 1973 — CASE 43/72 MERKUR v COMMISSION

In Case 43/72

THE COURT composed of: R. Lecourt, President, A. M. Donner and M. Sørensen, Presidents of Chambers, R. Monaco, J. Mertens de Wilmars, P. Pescatore, H. Kutscher (Rapporteur), C. Ó Dálaigh and Lord Mackenzie Stuart, Judges, Advocate-General: H. Mayras Registrar: A. Van Houtte

gives the following

JUDGMENT

Issues of fact and of law

I — Facts and procedure

1)

A —) On 12 May 1971, the Council, on the basis, in particular, of Article 103 EEC Treaty, issued Regulation (EEC) No 974/71 (OJ L 106, p. 1). This Regulation was amended on certain points by Regulation No 2746/72 of the Council of 19 December 1972 (OJ L 291, p. 148) with effect from 1 July 1972. Since the events material to the case all took place before this date, the following is based solely on the original version of Regulation No 974/71. Article 1 (1) of Regulation No 974/71 authorizes Member States in accordance with the conditions referred to in the further provisions of the Regulation ‘to charge on imports from Member States and third countries’ and ‘to grant on exports to Member States and third countries compensatory amounts’ if ‘for the purposes of commercial transactions, a Member State allows the exchange rate of its currency to fluctuate by a margin wider than the one permitted by international rules’. Under paragraph 2 of the same Article this authorization applies Moreover it is stated in the last sentence of this paragraph: ‘This option shall be exercised only where application of the monetary measures referred to in paragraph 1 would lead to disturbances in trade in agricultural products’. Article 2 governs the calculation of the compensatory amounts; paragraphs 1 and 2 thereof provide: Article 4 reads: Article 6 requires the Commission to adopt detailed rules which ‘may include other derogations from the regulations in the common agricultural policy’ and are to cover in particular the fixing of the compensatory amounts. Article 7 reads: ‘Partial or temporary use may not be made of the authorization provided for in this Regulation’. Under Article 8 the Regulation was applicable with effect from 12 May 1971; it remains valid until the Member States concerned ‘again apply the international rules on margins of exchange rate fluctuation around official parity’. The Regulation was essentially to deal with the following matters

‘(a) to products covered by intervention arrangements under the common organization of agricultural markets;

b) to products whose price depends on the price of the products referred to under (a) and which are governed by the common organization of market or are the subject of a specific arrangement under Article 235 of the Treaty’.

‘1. The compensatory amounts for the products covered by intervention arrangements shall be equal to the amounts obtained by applying to the prices the percentage difference between:

the parity of the currency of the Member State concerned declared to and recognized by the International Monetary fund, on the one hand, and

the arithmetic mean of the spot market rates of this currency against the US dollar during a period to be determined.

2. For the other products referred to in Article 1, the compensatory amounts shall be equal to the incidence, on the prices of the product concerned, of the application of the compensatory amount to the prices of the product referred to in paragraph 1, on which they depend’.

‘1. No compensatory amount shall be fixed where, in any Member State, the percentage referred to in Article 2 (1) does not exceed 2.5 %.

2. No compensatory amount shall be fixed for products for which the amount calculated in accordance with Article 2 is negligible in relation to their average value’.

in the last few weeks preceding its issue ‘certain foreign exchange markets within the Community have been disturbed by speculative movements involving an abnormal influx of short-term capital’ which was such as ‘to provoke … dangerous economic effects for economic development’;

the Council ‘in order to put an end to abnormal movements of capital, was prepared to envisage that in certain circumstances Member States may, for a limited period, widen the margins of fluctuation for the exchange rates of their currencies in relation to their present parities’;

‘serious difficulties may arise’ as a result of such measures ‘as regards the proper functioning of the common market’ because ‘trade to which the current rate of exchange applies may then be effected at a price, in national currency, lower than the intervention or buying-in prices laid down by Community rules on the basis of the official parity’ which in turn ‘may entail a disruption of the intervention system laid down by Community rules and abnormal movements of prices jeopardizing a normal trend of business in agriculture’.

B —) The Commission issued various regulations to implement this, among them Regulation No 1014/71 (OJ L 110, p. 10) on 17 May 1971 applicable from 12 May 1971. In the Annexes to this Regulation the compensatory amounts provided for in Article 1 of Regulation No 974/71 were fixed for a number of products, inter alia for products processed from cereals (Annex 1, B); the list however contained no products processed from barley. The compensatory amounts applied only to the foreign trade of the Federal Republic of Germany and of the Kingdom of the Netherlands because according to the statements in the Recitals in the Regulation the power as declared in Article 1 (1) of Regulation No 974/71 affects only these Member States.

C —) By its Regulation No 1687/71 of 30 July 1971 (OJ L 173, p. 1) which came into force on 2 August 1971, the Commission replaced the Annexes of Regulation No 1014/71 with fresh Annexes. The rubric ‘Products processed from cereals’ (Annex I, B) now includes also ‘barley groats and meal’ (No 11.02 A III of the Common Customs Tariff).

D —) The applicant is concerned principally with the export of barley groats, barley meal and barley flakes. Between 12 May and 27 July 1971 the applicant delivered many products of this kind to customers in third countries and asked the competent German Head Customs Office on each occasion to grant it compensatory allowances for these products. The Head Customs Office rejected these claims on the grounds that products processed from barley were not mentioned in Regulation No 1014/71 and there was thus no provision for compensatory allowances on export of products of this kind. The applicant raised an objection to this; the Head Customs Office has postponed a decision on this matter until the present proceedings are concluded. Between 13 July and 21 September 1971 there was an exchange of correspondence between the applicant and the Commission. The applicant threatened the Commission with a claim for damages unless by formulating more precisely or amending Regulation No 1687/71 it included products processed from barley in the scheme of compensatory allowance — as it was legally obliged to do — with retrospective effect, and gave directions in the proper quarters for the sum of DM 198448.18 to be paid to the applicant, this sum being due to the applicant in respect of exports made between 12 May and 27 July 1971. The Commission refused to comply with this request.

2) The present action was started on 10 July 1972. The written proceedings took their normal course. The Court has decided, on the report of the Judge-Rapporteur, having heard the Advocate-General, to proceed without any preparatory inquiry. The parties presented oral arguments at the hearing on 6 February 1973. The Advocate-General presented his opinion at the hearing on 27 June 1973.

I — Submissions of the parties

The applicant asks that the Commission be ordered to pay the applicant DM 50000 and to pay the costs of the proceedings.

The Commission asks,

that the claim should be rejected as unfounded and that the applicant should be ordered to bear the costs;

as a subsidiary plea: that the applicant be directed by an interim judgment to exhaust the administrative and legal means open to it in the Federal Republic of Germany in relation to the refund of compensatory allowances;

as a subsidiary plea: that by an interim judgment the decision on the amount of damages be reserved.

II — Pleas and arguments of the parties

1. Admissibility

A — Evasion of the plea of nullity

The Commission explains that it is aware that the Court has repeatedly deemed admissible, claims for damages founded on the alleged defectiveness of Regulations (Judgment of 2 December 1971, Aktien-Zuckerfabrik Schoppenstedt v Council, Case 5/71, Rec. 1971; Judgment of 13 June 1972, Compagnie d'Approvisionnement and Others v Commission, Cases 9 and 11/71, Rec. 1972). The Commission declines formally to name an objection on grounds of inadmissibility but doubts whether the abovementioned decisions are to be taken to mean that pleas of this kind are always admissible.

Apart from this, these decisions raise certain doubts as the present case shows. The applicant claims as damages exactly the total of the compensatory amounts to which it would have been entitled had Regulation No 1687/71 been supplemented as the applicant desired. A judgment admitting the claim would have similar results to a judgment setting aside Regulation No 1014/71 or Regulation No 1687/71, which the applicant could not have secured directly, since no such claim would have been admissible. That judgment would in practice have effect erga omnes, because all enterprises which found themselves in a similar situation could claim damages on the same footing; moreover it would follow that the Commission would have been obliged to include products processed from barley in the compensatory scheme in the first place. Since harm caused to economic interests would almost always immediately give rise to a loss, parties who considered themselves prejudiced by an ostensibly defective Regulation would in future systematically resolve their problem by reliance on claims under Articles 178 and 215 EEC Treaty which could have dangerous consequences for the Community. In fact the number of claims and actions for damages has markedly risen since 1971.

The applicant's answer is that the admissibility of the claim is clearly apparent from the decisions mentioned by the Commission. The opposite view would lead to the individual's being deprived of all legal protection against ‘legislative injustice’. The claim does not seek to change the law but merely asks for compensation for the damage that has been suffered. A judgment given according to the applicant's view would only incidentally contain a declaration that compensatory allowances ought to have been fixed from the outset for products processed from barley; it would have legal force only as between the parties and in relation to the claim for payment made in the proceedings. The Commission could leave other undertakings which made claims on the same grounds to pursue their remedy at law.

B — Protection of legal rights

The Commission is of the opinion — again without raising a formal objection of admissibility — that the legal rights of the applicant are sufficiently protected by its ability to pursue its pending objection with the German Authorities. It must not of course be overlooked that these Authorities could then reject the objection in reliance on the Regulations of the Commission; but the applicant can then bring any such decision before the German courts who for their part could refer to the Court under Article 177 EEC Treaty the question of the validit of those Regulations.

For further observations which the parties make on this point in relation to the merits of the claim, reference is made to the statements under head 2D below.

2. Merits

A — General

The Commission states that claims for damages based on the ostensible defectiveness of Community Regulations have hitherto received generous treatment so far as admissibility is concerned. The result must be that in each case, on examination of the merits of the claim, strict standards must be set which could in certain circumstances bring about a failure of the claim ‘after a sort of preliminary examination’ and — so far as the law relating to agriculture is concerned — render further investigation into the complex structure of the market regulation superfluous. Such a procedure is necessary in order that the raising of claims for damages should be reserved for important cases. Grounds for such a limitation are to be found in the Judgment of the Court already mentioned in Case 5/71 and in the Judgment of 25 October 1972 (Firma R. & V. Haegeman v Commission, Case 96/71, Rec. 1972).

B — Alleged illegality of the contested Regulations of the Commission

a) Infringement of Regulation No 974/71 of the Council

The applicant states that products processed from barley unquestionably fall within the products mentioned in Article 1 (2) of Regulation 974/71 for which compensatory amounts can be granted. Article 7 of the Regulation under which the power conferred in that Regulation may not be the subject of ‘partial or temporary use’, lays an obligation on the Commission to fix compensatory amounts for all products comprised in the abovementioned paragraph 2. The Commission infringed Regulation No 974/71 by not including products processed from barley in the scheme of compensatory allowances for the period from 12 May to 2 August 1971. As the purpose of this order is inter alia to protect the citizen trading in agricultural products from being prejudiced by measures relating to currency policy taken by certain Member States, the Commission owes a duty to the applicant to observe the Regulation.

The Commission's answer is that the ban enunciated in Article 7 of Regulation No 974/71 applies only to the Member States: that is evident both from the text of the provision and the scheme and purpose of the Regulation. The authors of the Regulation wanted to prevent Member States from falsifying the criteria set by the Commission and from prejudicing the effectiveness of the system set up, for example by granting compensatory amounts only for part of the products under consideration, or for import only or export only, or at smaller amounts than those fixed by the Commission.

The Regulation gave the Commission power to limit the products mentioned in Article 1 which could be included in the compensatory system and to that extent allowed it a wide area of discretion. This is clear from Article 4 and above all from Article 1 (2), last sentence. Disregarding its wording and its unfortunate place from a systematic point of view, within the Regulation, this provision is not addressed to the Member States but to the Commission, with an indication not to fix compensatory amounts automatically for all products under consideration, but to examine in each case whether ‘application of the monetary measures referred to in paragraph 1 would lead to disturbances in trade in agricultural products’. A contrary interpretation overlooks the fact that under Article 1 (1) in conjunction with Article 7 the Member States are given power only to apply the compensatory system in its entirety or not at all, but not at their discretion to grant compensatory amounts for only a part of the relevant products.

Regulation No 974/71 does not seek to protect agriculture or even trade in agricultural produce, but rather to ensure — as the preamble indicates — the proper functioning of the Common Market and a normal economic development in the field of agriculture. This limited aim is clear inter alia from the fact that the system of compensatory amounts is applicable also in intra-Community trade and so again raises barriers to this trade. As the Court stated, in its abovementioned Judgment in Cases 9 and 11/71, the Community legislature is not bound to compensate all the disadvantages which could befall the importers and exporters of a Member State from the measures of currency policy taken by that State. The fact that Article 1 (2), last sentence, of Regulation No 974/71 refers to ‘disturbances in trade’ proves nothing to the contrary; by this is not meant every interference with normal channels of trade, that is to say, not every reduction in the exporters' opportunities to sell.

The Commission in issuing Regulation No 1014/71 considered it inappropriate to fix compensatory amounts for the majority of processed products. Since a compensatory amount — as the Commission undertakes to show on the basis of an evaluation made for barley and barley groats — has a smaller incidence on the prices of products of this kind than on those of the basic product, this suggested, having regard to Article 4 (2) of Regulation No 974/71, excluding those products altogether. The Commission applied this provision, however, only where a theoretically calculated compensatory amount of less than 1 % was indicated, which was not the case for products processed from barley. But the basic concept of the provision, that the smaller the effect of the compensatory amounts on prices, the less the danger of a disturbance in trade, must be taken into account in the application of Article 1 (2), last sentence of the Regulation.

The Commission started from the premise that products processed from barley were imported into Germany and the Netherlands only on a very limited scale so that a ‘disturbance in trade’ was not to be feared at any rate as long as variations in the exchange rates were contained within narrow limits.

As regards exports of the products under discussion there was no danger in May 1971 that the intervention system would be disturbed by considerably reduced opportunities for sale. It was still less to be feared that the volume of exports of the German processing industry would be harmed to any extent by the relatively small compensatory amounts not being granted, because this industry has very largely dominated the market in various third countries, Denmark among them. Significantly the applicant makes no claim for damages on account of lost business.

It can be admitted that in individual cases German exporters have suffered hardship. The Community organs were not however obliged to concern themselves with these disadvantages which were not of their making. Compensation of this kind had come up for consideration at most on equitable grounds. As against this was the consideration that such a system would have involved compensatory amounts for internal Community trade and would have intensified the fragmentation of the agricultural market. Moreover the necessarily flat-rate nature of the measures taken has to be borne in mind.

The subsequent inclusion by the Commission of the products in question in the compensatory system is due to the fact that in view of changed circumstances disturbances had henceforward to be taken into account. The variations in the spot market rates of the German mark and the guilder from the official parity had risen in the period in question from 3 % to 6 %; moreover account had to be taken of the fact that the broadening of the margins of fluctuation and consequently the compensation system would persist for some considerable time.

The applicant's reply is that the Commission interprets Regulation No 974/71 incorrectly. Article 1 gives power only to Member States for specific measures and specifies in its last sentence that ‘this option’ shall be exercised only in the circumstances therein mentioned: this sentence applies exclusively to Member States. Article 7 is to be read in conjunction with Article 6 which deals with the implementing regulations to be issued by the Commission; and thus it is directed to the Commission. The fact that the expression ‘give power to’ is used only in Articles 1 and 7 does not conflict with this interpretation, because Article 6 in substance gives a similar power, namely to the Commission.

If the Commission, as it claims, had been given power to apply the system of compensation only to individual products i.e. in part the result would have been that Member States would have been compelled, in carrying out the measures taken by the Commission, likewise to exercise the power only in part, contrary to Article 7.

That Article 1, last sentence, of Regulation No 974/71 is directed only to Member States is clear from the fact that, as the Commission itself states, the system of compensatory amounts has been the undesirable consequence of measures of currency policy taken by individual Member States and it has only been possible to accept it so far as this was indispensable in the interest of the Common Market. The Council was thus willing to give Member States the power to grant compensatory amounts from the outset only in the case where the said measures affecting currency would lead to the disadvantages indicated in that order.

The area of discretion of the Commission was not broad but limited: the Commission had in particular to restrain itself from any encroachment on the basic principles of Regulation No 974/71. Nothing to the contrary is to be deduced from Article 4. This condition limits the power given to the Commission, in so far as it may not be exercised in cases of small incidence. Indeed the Commission was justified in fixing the general upper limit for cases of small incidence as it deemed fit. If this limit was exceeded in the case of a particular product, as the Commission itself admitted it was in the case of the product in question, then the Commission was obliged to fix compensatory amounts for this product.

The Commission would however have infringed Regulation No 974/71 even if Article 7 thereof, contrary to the view of the applicant, binds only to the Member States. As it states itself, it based the scheme to which objection is raised only on the last sentence of Article 1 of the Regulation which, as explained, applies only to Member States. The exclusion of products processed from barley could in any event have been justified by the fact that the Commission in the application of Article 4 (2) had fixed the upper limit of small incidence within the area of its discretion at a higher figure than 1 %. On its own showing it did not do this and so bound itself and was obliged to fix compensatory amounts for all products for which the incidence exceeded 1 %.

Moreover the Commission, as its statements showed, allowed itself to be guided by irrelevant considerations. In the first place it took account of aspects of import but disregarded those of export and especially disregarded the fact that interference with the export of products processed from barley must make it difficult for the home market to dispose of the basic product. In this connexion it is irrelevant that the applicant and other undertakings in a similar position had, to a considerable degree, processed imported barley ‘for even barley produced in third countries, which was imported in spite of the burdens on import, exercised pressure on the market within the Community’.

The Commission asserts against this that the term ‘authorization’ is never used in regular Community practice in relations between Council and Commission. Further this expression does not do justice to the meaning of the conferring of powers provided for in Article 155 EEC Treaty. On the contrary ‘authorization’ is always used when Member States are to be permitted to deviate from general rules and make special regulations. The Commission's interpretation of Regulation No 974/71 is based on the fact that Article 6 (2) thereof laid upon the Commission ‘the obligation to fix the compensatory amounts’, that is a measure which of necessity precedes the ‘exercise’ of the ‘authorization’ only in this second phase does the problem of application in part or temporarily arise.

If the Commission had been forbidden to exclude part of the products under consideration from the compensatory system, then its function in putting Regulation No 974/71 into effect ‘would have been reduced almost to the level of pure arithmetic’. It is clear that the Council did not intend this because the Commission was even entitled to determine ‘other derogations from the Regulations on the common agricultural policy’ (Article 6 (1)) and the fixing of compensatory amounts was to be done in accordance with the management committee procedure — which as the Commission shows in the light of examples is only provided for if the Commission enjoys an economically significant area of discretion.

Only in the course of the meeting held in the night of 11/12 May 1971 preceding the issue of the Regulation did the Council, with the Commission's assent, put Article 7 into the text of the Regulation ‘and this for the precise purpose of expressly avoiding the apparent danger of a selective use by the Member States with no possibility of control by the Community’.

The view that Article 1 (2), last sentence, of the Regulation is directed to the Commission alone is fortified by the consideration that it runs contrary to the plain meaning of the Regulations to leave administration of the concept of ‘disturbances in trade’ to the discretion of the Member States and so to endanger the uniformity of the common agricultural policy. As a matter of construction and having regard to the circumstances in which the Regulation arose the said rule is to be understood to mean that it should make it possible ‘by insertion of a selective criterion’ to limit the range of products coming into the compensatory system.

As regards the alleged ‘self-restriction’ on the part of the Commission the fixing of the upper limit of negligible incidence at 1 % was a purely internal criterion which moreover was not applied too rigidly. In view of the shortness of the time in question (May to August 1971) this internal practice could not acquire any binding force. There was no question of this because the system objected to was already justified on the basis of Article 1 (2), last sentence of Regulation No 974/71.

That the import side took first place with the Commission agrees with the general tendency of the cereal market regulation which provides for compulsory levies but as against this merely permits reimbursement on export.

b) Discrimination

1. The applicant claims that the provisional non-inclusion of products processed from barley in the compensatory system is incompatible with Article 40 (3) EEC Treaty because it discriminates against German exporters of these products and indeed against exporters of other Member States as well, which had taken no measures of currency policy of the kind described in Regulation No 974/71, as well as against those German undertakings concerned with the export of products already brought into the compensatory system by Regulation No 1014/71. The Commission states following the judgments of the Court mentioned many times, in Cases 5/71 and 9 and 11/71 something in the nature of ‘discrimination’ can only give rise to a claim based on breach of official duty if it constitutes ‘a sufficiently flagrant violation of a higher-ranking legal rule designed for the individual's protection’ — which is not the case here.

2. The applicant claims that the non-inclusion of products processed from barley in the compensatory system put the German exporters at a disadvantage in relation to those from other Member States which did not float their exchange rates. The German exporters had to demand a higher price for their goods than their foreign competitors and thus became uncompetitive. Such discrimination inevitably leads — contrary to the spirit of Regulation No 974/71 — to disturbances and dislocations of trade. The Commission's reply is that the disadvantage to which objection is taken affected all German exporters and in the final analysis arose from the currency policy measures taken by the Federal Republic of Germany, for which the Community had no responsibility. Apart from this the failure to grant the compensatory amounts can be justified on the grounds that the competitive position of the German export trade involved was considerably more favourable than that of the export trade of the other Member States. The applicant is of opinion that this consideration of the Commission is irrelevant and so discriminatory.

3. In the view of the applicant the scheme originally adopted by the Commission contains a further discrimination vis-à-vis other German exporters. This applies in the first place in relation to those firms who export products processed from other cereals for example meal and groats of common wheat as well as other residues of cereals which from the outset were included in the compensatory scheme. Moreover discrimination was shown against products processed from barley as compared with raw barley. Since Regulation No 1014/71 provides for compensatory amounts for the export of raw barley it has become possible to offer this product relatively more cheaply than processed products manufactured from it, whence arose distortions of the normal price relationship between the two groups of merchandise. This disadvantage was further increased because Regulation No 974/71 imposed compensatory amounts on the import of raw barley. The Commission's reply is that it has already fixed compensatory amounts for certain products processed from other kinds of cereals in Regulation 1014/71, because these products are to a certain degree interchangeable with the raw product and for these the incidence of the compensatory amounts is relatively high. There has been no discrimination because, as a comparison between the list in the Annex to that Regulation and the corresponding list in Regulation No 1687/71 shows, processed products were included in the earlier scheme only by way of exception. Moreover the groups of merchandise mentioned by the applicant are not comparable inter se because this merchandise is intended for different markets and different purposes. The same applies to the scheme for raw barley and products processed from barley as the Commission sets out in detail. As the compensatory amount has only an insignificant incidence it cannot be assured that the competitiveness of processed products has appreciably deteriorated in relation to raw barley. The view that products processed from barley ought already have been included in May 1971 cannot be justified by saying that compensatory amounts were to be paid on import of raw barley, because these amounts merely raised the price of the imported product to the level of the domestic product so that there was no question of an additional burden. The applicant replies that the reference to the ‘relatively high’ incidence of the compensatory amounts in the case of the processed products favoured from the start is too indefinite. Apart from this, the Commission, in fixing the upper limit of negligible incidence at 1 %, bound itself and so became obliged to include products processed from barley in the compensatory system with effect from May 1971. Finally, to consider the effects of the compensatory amounts only on a relative basis is to disregard economic reality. From August 1971 compensatory amounts for products processed from barley had nevertheless been between DM 10.80 and DM 15.12 per metric ton. The fact that compensatory amounts for these products were not given at first had of necessity disturbed the price relation between them and raw barley and led to a dislocation of trade as the fall in the applicant's export contracts shows. The Commission again emphasizes that in its initial application of Regulation No 974/71 it took the general line that the conditions of Article 1 (2), last sentence, of the Regulation did not as a rule obtain. At that time it began by looking at the matter as a whole. The first Regulation that was made had factual grounds to support it. The legislator in granting benefits has a wider area of discretion than in imposing charges. Further it must be indirectly inferred from the precedents of the Court on the law relating to breaches of official duty that only a flagrant breach of the principle of equality gives rise to claims for compensation. In the case of bran and other residues from cereals the incidence of the compensatory amounts is ‘relatively high’ because it is fundamentally the same as in the case of the original product. It is a case of by-products — as opposed to processed products — for which processing costs are non-existent or of no significance. Even if the Commission has fixed compensatory amounts in the individual case without this being necessary, the applicant could not derive any rights from this, because this did not cast doubts on ‘the relevance and fairness of the general regulation scheme’.

C — Culpability

The applicant is of opinion that the highest standards of care must be set for the Commission: therefore an objectively wrong attitude on the part of this institution gives grounds for supposing it acted improperly. The Commission should have recognized that it could not rely on Article 1 (2), last sentence, of Regulation No 974/71 for what it did and that it was not permissible for it, except for very compelling reasons, to decide from the practice which it otherwise followed in the application of Article 4 (2) of the Regulation.

In the view of the Commission there could be no question of culpability even if, contrary to its interpretation, the Regulation objected to was defective. It was compelled to issue the first implementation provisions in the shortest time and in the process to review an extraordinarily large number of products to see whether there was any danger of a disturbance in trade.

D — Damages

The applicant claims that the Regulation objected to did great harm to its business. Taking the conversion rate of 100: 180 fixed in Regulation No 1052/68 of the Council dated 23 July 1968‘on the import and export system for products processed from cereals and from rice’ (OJ L 179, p. 8), the compensatory amount for the processed products in question would have been DM 15.12 per metric ton. Only if the applicant had been able to count on this amount would the applicant under the circumstances prevailing at the time have been able to get further profitable export business in products processed from barley. A fortiori was this the case when it had concluded deals at all times in English pounds and US dollars, when on the floating of the exchange rate its contracts then existing and subsequently discharged had been made on the basis of these currencies, and it had also been able, in accordance with commercial custom, to conclude new contracts basically in these currencies alone. On 31 July 1970 the applicant had orders for the export of products processed from barley to a total 10000 metric tons for delivery up to January 1971. In July 1971 on the other hand its total of corresponding long-term contracts had fallen to nothing.

In its plea the applicant evaluates its losses arising, of which it claims only part, at DM 198448.18. This, as the calculation attached to the pleading shows, is the total of the compensatory amounts which it lost on its exports made in the period from 12 May to 2 August 1971.

The applicant can in all probability establish its claim for damages only by the present plea, because it is to be feared that the German authorities would dismiss the complaint lodged with them by stating that they were bound by the Regulations of the Commission.

The Commission replies that it has no objections in principle to this method of calculating the damages, with the reservation that the contracts mentioned and their execution be examined.

The applicant could however have avoided a loss at least in part so far as it could have fallen back or actually did fall back on processing barley imported from third countries. In this case it could have claimed the benefit of the rules concerning ‘inward processing’ (Council Directive of 4 March 1969‘on the harmonization of provisions laid down by law, regulation or administrative action in respect of inward processing’ (OJ L 69, p. 1) and would not have needed to pay any compensatory amounts for raw barley.

In this way the applicant could have compensated for the failure to grant compensatory amounts. To what extent it could thus have averted or prevented the loss depends upon when and to what degree it had already purchased raw barley before 12 May 1971 and whether it was contractually bound to accept domestic raw barley. The Commission reserves its detailed position on these questions.

Having regard to the principles laid down in the Judgment of the Court on 14 July 1967 (Kampffmeyer and Others v Commission, Cases 5, 7 and 13 to 24/66, Rec. 1967) it must be considered that it was incumbent on the applicant to exhaust the legal steps it had already taken with the German Authorities. That case, it is true, can be distinguished from the present to the extent that the possible defectiveness of the German legislation could have been based exclusively on a defectiveness of the measures objected to which were taken by the Community. There is however an anology to the extent that the applicants in the abovementioned cases could have claimed reimbursement of the overpaid levies from the German authorities and that the applicant in the present case could have claimed the compensatory amounts it had been refused from the German Treasury if it had won the day because these amounts were not payable by the Community.

The applicant's reply is that it could have discharged old contracts only at a loss and could have concluded new ones only by incurring losses. It sets out a ‘total calculation’ for the export of 9583 metric tons of barley groats and assesses the loss on the deal at DM 142000. This loss could have been counterbalanced in some measure by the payment of the compensatory amounts of DM 125048 calculated by the applicant.

The applicant and its suppliers were not obliged to devote themselves to ‘inward processing’. Moreover the manufacturers of other products processed from cereals for which the Commission fixed compensatory amounts from the beginning could also have availed themselves of this opportunity.

The defectiveness of Regulation No 1014/71 can finally be determined in domestic proceedings only by a reference under Article 177 EEC Treaty. The applicant is hardly in a position to get the compensatory amounts, which are being contested, positively fixed in this way with effect from 12 May 1971 because the Commission would object that such a request evades the conditions of admissibility contravened in Articles 173 and 175 EEC Treaty.

The Commission's reply is that it is contrary to commercial notions that the applicant worked at a loss. The obvious conclusion is that the actual calculation by the applicant gives a more favourable impression. In any event the doubts existing on that subject justified the Commission's subsidiary proposal that in case of an approval in principle of the claim for damages the decision on the amount of the damages should be reserved for the final judgment.

The Commission set out in detail its reasons for not understanding why the applicant did not avail itself of ‘inward processing’. It is true that the applicant was not ‘obliged’ to do so, but it has itself to bear the risk it has incurred by declining to do so. In any case a precise examination of the facts would be necessary in this connexion should the occasion arise.

The Court has already declared in its judgments mentioned above in Cases 5, 7 and 13 to 24/66 and in Case 96/71 that a claim for damages cannot be made against the Community when the damages consist of a levy payable to the State authorities and the legality of this levy can be contested before a national court. The basic principle of this decision can be applied to the present case. If the applicant takes legal proceedings before the German courts it is to be expected that they would refer the matter to the Court under Article 177 EEC Treaty. If the applicant in such proceedings received a favourable decision, the Commission would not hesitate to draw the necessary inferences and to see that the applicant received the compensatory amounts asked for (not by way of damages, but) ‘in natura’. This solution would be preferable because the Community, in the event of its being ordered to pay damages, would have to pay amounts to the applicant which under present rules normally have to be borne by the Member States; this result would be unsatisfactory.

Grounds of judgment

1. In this action, filed on 10 July 1972, the applicant seeks payment from the Commission of 50000 DM by way of compensation for the damage suffered by the applicant owing to the Commission's failure to fix compensatory amounts, as envisaged by Article 1 of Regulation No 974/71 of the Council of 12 May 1971 (OJ L 106, p. 1), for exports of products processed from barley for the period from 12 May to 2 August 1971.

2. Thereby, it is alleged, the Commission infringed both the above Regulation and the rule against discrimination contained in Article 40 of the EEC Treaty, and these infringements involve the Community in liability under the second paragraph of Article 215 of the Treaty. The infringements arise either from the fact that Regulation No 1014/71 of 17 May 1971 (OJ L 110, p. 10), in force during the period referred to above, made no provision for compensatory amounts on exports of products processed from barley, or from the fact that the Commission did not give retrospective effect to Regulation No 1687/71 of 30 July 1971 (OJ L 173, p. 1), which came into force on 2 August 1971 and provided for the amounts to be granted on these products.

Admissibility

3. While it has made no formal objection on the point, the Commission has expressed doubt as to whether a claim for damages can be admissible, as the Court has already decided, when, by challenging the legality of a Community regulation, it seeks a financial result, identical or similar to that which would arise from the annulment of the regulation, although an application by the applicant for such an annulment would not itself be admissible.

4. However, the action for damages provided for in Articles 178 and 215 of the Treaty was included as an autonomous form of action, with a particular purpose to fulfil within the system of actions, and subject to conditions on its use by its specific nature. Such an action differs from an application for annulment in that its end is not the cancellation of a particular measure but compensation for damage caused by an institution in the performance of its duties. The action for damages seeks only recognition that a right to compensation exists and, therefore, satisfaction solely for the benefit of the applicant.

5. The Commission then maintains that the applicant should be sent back to pursue its claim before the administrative and judicial authorities in the Federal Republic of Germany, on the grounds that the event giving rise to the present dispute was the refusal by the competent customs office in that Member State to grant the applicant compensatory amounts on the exports it had made to third countries. If such a procedure were followed it would result in a reference to the Court under Article 177 of the Treaty from the German courts of the question of the validity of Regulations Nos 1014/71 and 1687/71.

6. But the Court already has the case before it and within its jurisdiction, and is therefore bound to see whether or not these regulations are tainted with the alleged irregularities. It would not be in keeping with the proper administration of justice and the requirements of procedural efficiency to compel the applicant to have recourse to national remedies and thus to wait for a considerable length of time before a final decision on his claim is made.

7. The action is therefore admissible.

On the Substance

8. Since the disputed actions are of a legislative nature and constitute measures taken in the sphere of economic policy, the Community is not liable for any damage suffered by individuals as a consequence of those actions under the provisions of Article 215, second paragraph, of the Treaty, unless a sufficiently flagrant violation of a superior rule of law for the protection of the individual has occurred. For that reason the Court must first consider whether such a violation has occurred.

9. Regulation No 974/71 was amended by Council Regulation (EEC) No 2746/72 of 19 December, 1972 (OJ L 291, p. 248), which came into force as from 1 July 1972. However, since the events forming the subject matter of the dispute took place before that date, the action will be decided on the basis of the original text of Regulation No 974/71, which will accordingly be the only one referred to in what follows.

The first submission

10. 1. The applicant maintains that the Commission was under a duty in principle to fix compensatory amounts for all the products listed in Article 1 (2) of Regulation No 974/71; this was by virtue of Article 7 of the same Regulation which states ‘partial … use may not be made of the authorization provided for in this Regulation’. The above provision, it is maintained, is addressed to the Commission, as well as to Member States.

11. According to Article 1 (1) of Regulation No 974/71, any Member State which adopts particular monetary measures is ‘authorized’ to ‘grant on exports to Member States and third countries compensatory amounts’. Article 7, echoing the term ‘authorization’, is addressed solely to Member States.

12. By virtue of the last sentence in Article 1 (2) of Regulation No 974/71, the option of granting compensatory amounts on exports ‘shall be exercised only where application of the monetary measures referred to in paragraph 1 would lead to disturbances in trade in agricultural products’. Therefore, the amounts in question cannot be granted for any specific product unless without them trade in that product would be subject to disturbances.

13. From the sense and purpose of Regulation No 974/71 it is apparent that any decision in this respect is to be made by the Commission and not by Member States. Article 6 makes it clear that the Commission, not a Member State, is to fix the compensatory amounts and, consequently, make the decision that under the requirements in the Regulation, no compensatory amount should be attached to a particular product. Furthermore, Regulation No 974/71 was introduced on the basis of point four of the Council Resolution of 9 May 1971 on the monetary situation (OJ C 58, p. 1), which states: ‘being anxious to forestall recourse to unilateral measures to deal with possible disturbances in trade in agricultural products, the Council shall, immediately and in accordance with Article 103 of the Treaty, draw up appropriate measures’. Since the object of the Regulation was therefore to preclude recourse to ‘unilateral measures’, it is hardly conceivable that it would leave to the exclusive discretion of the Member States concerned the question whether, for a specified product, it is or is not necessary, to grant these amounts in order to avoid disturbances.

14. For those reasons it follows that the Commission is under no duty to fix compensatory amounts for every product listed in Regulation No 974/71.

15. 2. The argument that the Commission was under a duty to fix ab initio compensatory amounts for exports of the products concerned is also supported, in the applicant's view, by the practice followed by that institution in applying Article 4 (2) of the Regulation, whereby ‘no compensatory amount shall be fixed for products for which the amount calculated in accordance with Article 2 is negligible in relation to their average value’. According to the applicant the Commission itself omitted to fix compensatory amounts only when those would come to less than 1 % of the average value of the product. Having thus voluntarily limited its discretionary powers, the Commission was obliged to fix compensatroy amounts whenever that limit was surpassed, which was so, on the Commission's own admission, in the case of products processed from barley.

16. However, it is clear from the Commission's explanation that, far from observing this tenet strictly, the Commission regarded it from the start as no more than a guide and reserved the right to derogate from it whenever it considered, in its discretion, that special circumstances in the particular instance so required. In addition, the last sentence of Article 1 (2) of Regulation No 974/71, obliged the Commission to avoid fixing a compensatory amount whenever this did not appear necessary for the prevention of disturbances, irrespective of the proportion of the amount to the average value of the relevant product.

17. Accordingly, the submission based on a breach of a Regulation No 974/71 is unfounded.

The second submission

18. The applicant claims that by not fixing compensatory amounts for exports of products processed from barley the Commission practised discrimination between German exporters of such products and, on the one hand, exporters from other Member States which had not adopted the monetary measures referred to in Regulation No 974/71 and, on the other hand, German traders exporting products which had benefited from the compensatory system introduced by this provision from the beginning.

19. 1. As regards the comparison made with exporters from other Member States the adoption of Regulation No 974/71, introduced by virtue of Article 103 of the EEC Treaty and forming the basis of Regulations Nos 1014/71 and 1687/71, was prompted by the fact that some of the Member States, including the Federal Republic of Germany, had widened the margins of fluctuation for the exchange rates of their currencies in relation to their official parities.

20. If this widening makes the situation of importers and exporters in the country concerned different from that of their counterparts in other Member States, the disparity is to be attributed not to Community intervention but to the decision taken by this Member State.

21. While the powers conferred on Community institutions by the Treaty, and by Article 103 (2) in particular, include the option of mitigating some of the effects of such national measures, as a matter of the ‘common concern’ referred to in Article 103 (1), it does not follow that these institutions are bound to compensate for all the effects insofar as these are disadvantageous to importers and exporters in the Member States concerned. In fact, by enabling the Council, without obliging it, to ‘adopt … measures appropriate to the situation’, Article 103 conferred on that body wide powers of appraisal, to be exercised as a matter of ‘common concern’, and not in the private interests of a particular group of participants in the market. The alleged discrimination does not therefore exist.

22. 2. As regards the comparison made with German exporters of goods which had had the benefit of this compensatory system from the start, the different treatment of which the applicant complains would not be a violation of the principle of non-discrimination unless it appeared to be arbitrary.

23. It should be noted that in applying the last sentence of Article 1 (2) of Regulation No 974/71, the Commission has wide powers of appraisal in judging whether the monetary measures contemplated by the said regulation could lead to disturbances in trade in agricultural products. Bearing in mind the exceptional nature of the compensatory amounts, the Commission does not appear to have exercised these powers in an arbitrary fashion.

24. Moreover, Regulation No 974/71 is evidently an emergency measure, considering the events leading up to its adoption; consequently the Commission was compelled to draw up the rules for its implementation within a very short space of time, yet at the same time considering, for each of the numerous products concerned, whether its exclusion from the compensatory scheme would lead to disturbances in trade in that product. Since the assessment which the Commission had to make was perforce an overall one, the possibility that some of the decisions it made might subsequently appear to be debatable on economic grounds or subject to modification would not in itself be sufficient to prove the existence of a violation of the principle of non-discrimination, once it was established that the considerations adopted by it for guidance were not manifestly erroneous. It is clear from the documents that this was established in the case of the evaluation made of situation of the products in dispute in relation both to that of other products processed from cereals, and to that of barley.

25. Accordingly the submission based on an alleged discrimination is not well-founded.

26. The net result of the above considerations is that Regulations Nos 1014/71 and 1687/71 are not tainted with the illegality alleged. Consequently, the claim must be dismissed, and there is no need to examine the other conditions for non-contractual liability contained in the second paragraph of Article 215 of the Treaty.

Costs

27. According to 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.

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 40, 103, 178 and 215; Having regard to Regulation No 974/71 of the Council on certain measures of conjunctural policy to be taken in agriculture following the temporary widening of the margins of fluctuation for the currencies of certain Member States (OJ L 106 of 12 May, 1971, p. 1), especially Articles 1, 6 and 7, having regard to the Protocol on the Stature of the Court of Justice of the European Communities; Having regard to the Rules of Procedure of the Court of Justice of the European Communities; THE COURT hereby:

1 Dismisses the action as unfounded.

2 Orders the applicant to pay the costs.