JUDGMENT OF 4. 2. 1975 — CASE 169/73 COMPAGNIE CONTINENTALE v COUNCIL
In Case 169/73
THE COURT composed of: R. Lecourt, President, J. Mertens de Wilmars and A. J. Mackenzie Stuart, Presidents of Chambers, A. M. Donner, R. Monaco, P. Pescatore and M. Sørensen (Rapporteur), Judges, Advocate-General: A. Trabucchi Registrar: A. Van Houtte
gives the following
JUDGMENT
Facts
A —. The facts and arguments developed in the course of the written procedure may be summarized as follows:
I — Facts and procedure
1. The claim
The applicant, a big exporter of French cereals, seeks compensation amounting to more than FF 5·7 million for damage suffered as a result of contracts for the export of denatured wheat and barley to the United Kingdom.
The contracts had been concluded in September 1972, that is to say after the signing but before the entry into force of the Treaty of Acession of the new Member States to the European Economic Community. Deliveries were to take place between February and June 1973, that is to say after the implementation of the agricultural provisions of the Act concerning the Conditions of Accession and Adjustments to the Treaties (Act of Accession).
These contracts are said to have been concluded in view of a Resolution of the Council of 20 July 1972 to the effect that the export of the cereals in question from the Community to the United Kingdom would give a right to the payment of a compensatory amount of 42·33 u.a. per metric ton. Subsequently these compensatory amounts had to be reduced under the first paragraph of Article 55 (6) of the Act of Accession by reason of the increase in world prices of cereals, since the article in question lays down a ceiling for this category of compensatory amounts.
The applicant claims that the Community is liable by reason of the fact of having in July 1972 in the Council's Resolution formally stated the value of the compensatory amounts payable in trade with the United Kingdom and then in a regulation of 31 January 1973 having amended these amounts under Article 55 (6) without safeguarding the position of exporters who had already entered into contracts for the 1972/1973 marketing year.
2. The system of compensatory amounts
a) The Community agricultural rules apply to the new Member States as from 1 February 1973. Part Four, Title II of the Act of Accession laid down the transitional measures necessary to facilitate the adoption by the new Member States of the rules in force in the Community. Articles 51 and 52 of the Act of Accession provide for fixing prices in the new Member States for, inter alia, cereals, and their alignment with those of the original Community. Article 55 provides:
‘1. The differences in price levels shall be compensated as follows:
a) in trade between the new Member States themselves and with the Community as originally constituted, compensatory amounts shall be levied by the importing State or granted by the exporting State;
b) in trade between the new Member States and third countries, levies or other import charges applied under the common agricultural policy and export refunds shall be reduced or increased, as the case may be, by the compensatory amounts applicable in trade with the Community as originally constituted. Customs duties may not, however, be reduced by the compensatory amount.
2. For products in respect of which prices are fixed in accordance with Articles 51 and 52, the compensatory amounts applicable in trade between the Community as originally constituted and the new Member States, and between those States and third countries shall be equal to the difference between the prices fixed for the new. Member States concerned and the common prices.
…
3. -5…
6. The compensatory amount levied or granted by a Member State in accordance with paragraph 1 (a) may not exceed the total amount levied by that same Member State on imports from third countries.
The Council, acting by a qualified majority on a proposal from the Commission, may derogate from this rule, in particular in order to avoid deflections of trade and distortions of competition.’
b) Taking the view that these transitional measures necessitated the adoption of implementing measures, the Council adopted on 20 July 1972 a Resolution containing in annex a draft Council regulation laying down general rules for the system of compensatory amounts in the cereal sector. In this Resolution it ‘approves the text of the draft Regulation annexed to this Resolution, which will be formally adopted immediately after the entry into force of the Treaty of Accession …’. In the recitals to the Resolution it is stated: ‘whereas it is essential that traders should have knowledge of the content of such implementing provisions forthwith in order to enable the transition from the national systems in the new Member States to the Community system to be carried out under the best possible conditions; …’ The resolution and the draft regulation were published in the OJ C 86/16 on 10 August 1972. Article 1 of the draft regulation provides for the compensatory amounts applicable until 31 July 1973. For barley exported to the United Kingdom the amount was to be 42·33 u. a. per metric ton. (For denatured common wheat the compensatory amount was to be that applicable to barley). This amount remained well under the levy applicable on the adoption of the regulation that is 52·88 u. a. per metric ton. The draft contained no reference to the situation provided for in the abovementioned Article 55 (6).
c) During the course of the months following the adoption of the Resolution the world prices of cereals increased considerably. As a result the levies on imports were reduced, so that by September 1972 they reached a level lower than the compensatory amounts provided for by the draft regulation, that is to say the situation provided for in the first paragraph of Article 55 (6) arose.
d) Such was still the position when the time arrived in January 1973 formally to adopt the regulations relating to compensatory amounts. The Council did this in Regulation No 229/73 of 31 January 1973 (OJ L 27/25/73). The Council included in this regulation certain provisions not provided for in the draft of July 1972 relating to the situation envisaged by Article 55 (6). For such case, under Article 7 of the regulation, the Commission shall apply the scale set out in the Annex to determine the amount applicable by way of compensatory amount. The result is to ensure general harmony, albeit not absolute, between the levy and the compensatory amount.
3. Procedure
The application was lodged on 28 September 1973.
Having heard the report of the Judge-Rapporteur and the opinion of the Advocate-General, the Court decided to open the oral procedure without any preparatory inquiry.
II — Conclusions of the parties
The applicant submits that the Court should:
order the European Economic Community to pay the applicant the sum of FF 5728660·17;
order the European Economic Community to pay the costs.
The Council submits that the Court should:
dismiss the application;
order the applicant to pay the costs.
III — Submissions and arguments of the parties
Admissibility
The Council takes the view that since laws which it adopts may not normally be challenged by companies by way of annulment, neither can they be challenged by the expedient of an action for liability. It admits that the Court has not followed this in its case-law, but reserves the right to return subsequently to this objection on the grounds of inadmissibility.
The applicant states that it is claiming compensation for damage and not the annulment of the quasi-legislative act constituted by Regulation No 229/73. The objection on the grounds of inadmissibility is thus unfounded.
Substance
1. a. The applicant states that the provisions of the Act of Accession recognize the necessity of providing for the general rules of a system of compensatory amounts for the 1972/1973 marketing year which was commencing. Such was the purpose of the Resolution of the Council of 20 July 1972. The draft regulation annexed to the Resolution was the only text in existence such as to enable cereal exporters to know the conditions in which they could undertake new transactions. The indications thus given irreversibly affected the policy of cereal exporters in their forward transactions by encouraging them, from then on, to fill their order books until July 1973. It was thus on the basis and in consideration of the compensatory amount assessed at 42·33 u. a. per metric ton that the applicant at the end of September entered into export contracts to the United Kingdom relating to barley and denatured common wheat. It is clear that after these contracts had been entered into world prices for cereals increased considerably, which had the result of reducing considerably the difference between cereal prices in the original countries of the Community and world prices. In these circumstances, if it was decided to apply the provisions of the first paragraph of Article 55 (6) of the Act of Accession, the compensatory amount provided for in trade between the original countries of the Community and the United Kingdom would have had to be cut so as not to exceed the levy payable on import from third countries. The whole structure of the contracts for cereal exports made by French dealers on the basis of the Council's Resolution of 20 July 1972, would be upset and exporters would consequently suffer considerable loss. French cereal exporters did not fail to draw the attention of the Commission and the Council to this situation when, on 1 January 1973, the latter finally had to adopt the regulation. Further, on several occasions the applicant mentioned the situation to the Office National Interprofessionnel des Céréales, which in France was the executive organ of the Community for the payment of the compensatory amounts. Whatever provisions the Council thought of making for the future it would have been proper as regards the past not to alter the provisions of the draft of 20 July 1972 which French exporters had relied on in entering into contracts for the 1972/1973 marketing year. More precisely, the system in this resolution should have been maintained and the application of the first paragraph of Article 55 (6) of the Act of Accession ruled out. Ruling it out was all the more anticipated since the second paragraph of Article 55 (6) provided that the Council could derogate from this rule. b. The applicant contends that it was entitled to take it for granted that the Council would maintain the system which it had provided for and that the compensatory amounts would therefore be continued for the 1972/1973 marketing year at the level fixed in July 1972, at least as regards their application to contracts already entered into. This expectation was based in particular on the following considerations. The applicant recalls that in order to have regard to the general principles of the common agricultural policy and to overcome the difficulties inherent in trends on the markets of the Community in relation to the world market, the Council had seen fit to draw a distinction between two kinds of trade, the one intra-Community and the other with third countries. The principle on which the common organization of the cereal markets is based is the protection of the Community market with its corollary, the establishment of Community preference and the integration of national peculiarities. The application of this principle means that intra-Community trade benefits from a common organization of the markets with fixed and stable prices. On the other hand, trade with third countries remains characterized by the variations inherent in the world market and is subject to a flexible levy imposed on it with the operational corrective of advance fixing. Even if the risks inherent in any market structure were not removed in intra-Community trade, the essential Community principle of protection and stability is respected, in contrast to the position with regard to transactions concluded with third countries, which are completely exposed to the variations in world prices. The Act of Accession states clearly that the new Member States would be immediately subject to the obligations and enjoy the benefits of the common agricultural policy. This policy therefore applies ipso facto in its entirety to the United Kingdom which thus loses its status as a third country to gain that of a Member State. The fixed nature of the compensatory amounts on accession is thus undoubtedly in accordance both with the spirit and with the letter of the common organization of the market. It is inconceivable for the Council, while establishing a system of rules aimed at developing trade with a new Member State without interruption, to abandon a restrictive system (that of trade with third countries), which nevertheless allows exports by reason of the advance fixing, in order to adopt a system which was intended to be overtly more favourable, since it was rigid, and then once again to decide to abandon this latter in order to adopt flexibility in regulation No 229/73 without even making use of its correcting factor, advance fixing. The application of Article 55 (6) is also inconceivable for another reason. In departing from the principle of fixed compensatory amounts through the application of Article 55 (6), that is to say by making use of a compensatory amount of a variable type, the Council has not only disregarded Community preference, but also established a system favouring, in everyday commercial practice, cereal imports into the new Member States from third countries. In a rising world market this preference, given in practice to operators in third countries, arises in the following manner: when they import into Britain the levy which they have to pay, calculated as at the day of customs clearance, is lower and an additional benefit is granted to them over the price which they have fixed. The reverse process takes place for an exporter from an original Member State: the compensatory amount which he was to receive in trade with Britain is similarly reduced and he suffers a loss on his original price. The logical consequences of the system established by the Resolution of 20 July 1972 are that the Community has opted for the most simple system of rules. There is only one category of compensatory amounts fixed very clearly by the draft regulation as being the result of the difference between the two marketing prices. The draft does not mention Article 55 (6). In any case, if this paragraph had to be applied, the Community ought to provide, since it had established flexibility, the correcting factor for this, advance fixing. However, this exclusion appears logical since the Community has opted for the traditional solution in Community matters, That is to say price fixing and this solution sanctions respect for Community preference. The price fixing could be maintained in every case and does not constitute either a hindrance, distortion in the different kinds of trade or discriminatory dumping. The only objection would be of a bugetary nature in the financing of the EAGGF. c. The applicant's expectation has been disappointed. Not only is Regulation No 229/73 of the Council quite different from the draft annexed to the Resolution, but further it in no way safeguards the special position of the 1972/1973 marketing year. In comparing the two texts the applicant finds that the regulation of 31 January 1973 makes express reference to Article 55 (6) of the Act of Accession, which the draft regulation annexed to the Resolution of the Council of 20 July had passed over in silence. The applicant likewise observes that the regulation of 31 January 1973 introduces a flexible system of compensatory amounts. Under this new system it is the date of customs clearance which determines the level of the compensatory amount on the basis of the movement in world prices. The applicant concludes that the systems established by the Resolution and by Regulation No 229/73 are completely at variance. d. The wrongful act which the applicant complains of against the Council lies in the fact of having informed operators that rigidity would be the rule in intra-Community trade and then having totally altered the system by choosing flexibility although contracts entered into in good faith by operators on the basis of the original text were about to be performed. The regulations has a retroactive effect. It applies in effect to future exports, but these had their origin in contracts entered into under the system previously established by the Community. The applicant does not criticize the implementation of Article 55 (6) of the Act of Accession which is self-executing. It observes that the Resolution of 20 July 1972 has adopted a system outside the scope of this paragraph. Nor does it criticize the legality of the system implemented by Regulation No 229/73. Its real complaint is that the Council has successively adopted two radically different systems. e. As regards the EEC, the applicant contends that the Community's liability must be regarded as being widely defined, since, without there being express reference to misconduct, ‘the Community shall, in accordance with the general principles common to the laws of the Member States, make good any damage caused by its institutions or by its servants in the performance of their duties’ (Article 215 of the EEC Treaty). French law has defined these general principles in a well-established doctrine of government liability, in particular in the case of false indications or such as are not implemented, given by the administration; it is administrative misconduct capable of giving rise to this liability when the following conditions are fulfilled: the information has to be of an official nature; the indication has to be sufficiently precise; the person concerned has to have suffered damage directly resulting from the information; proof has to be given that there has been no negligence. In the applicant's opinion these conditions are clearly fulfilled in the present case. The applicant states that its conduct can not be criticized. It has acted precisely in accordance with the draft regulation of July 1972. It refers to cases of the French Conseil d'Etat and of the Court of Justice of the European Communities and in particular to the judgment of 14 July 1967 in cases Kampfmeyer and others (Rec. 1967, p. 318). It is incorrect to maintain, as the Council does, that misconduct consisting of incorrect information can arise only where the information is given individually as a result of a bilateral relationship between the person concerned and the administration. f. Confronted with the position created by Regulation No 229/73, the applicant immediately took the necessary measures to try to limit its loss, which amounts to FF 5728660·17 following the cancellation of certain contracts and payments of compensation for withdrawal, the completion of other contracts by the supply of equivalent products and finally the performance of other contracts resulting in a compensatory amount lower than that expected. It does not object to the hearing of experts, requested as an ancillary matter by the Council.
2. a. The Council First of all analyses the mechanism set in motion in implementation of the Act of Accession. It rejects the arguments of the applicant according to which the Council could have opted between two systems: either the application of Articles 51, 52 and 55 (1) or the application of the first paragraph of Article 55 (6). There is no incompatibility as alleged between the provisions referred to. The provisions are perfectly compatible inter se and the Community authority cannot dispense with the application of this or that where the conditions prescribed for its application are fulfilled. In the Council's opinion the comprehension of the system on which the applicant insists is based both on a wrong inrerpretation of Articles 51, 52 and 55 (1) and (2) and on a disregard of the scope of the first paragraph of Article 55 (6). The Council explains the significance of Articles 51, 52 and 55 (1) and (2) of the Act of Accession and states that the applicant exaggerates in claiming that the result of these provisions is that the markets of the new Member States are bound to that of the original Community in an ‘immutable’ manner in such a way that ‘on accession, the new Member States and the original Community henceforth form a single Community with the same price structure’. Certainly from the legal point of view the systems are the same. On the other hand, from the economic point of view, this is not the case, since during the first six months of 1973 the British market was to remain at its previous level, which was that of the world market. b. As regards Article 55 (6), the Council states that it is necessary to ensure the relationship with the Community system of flexible protection at the frontiers and also to have regard to the principle of Community preference. It is necessary to see to it that the compensatory amount cannot be higher than the levy which it replaces. If the case is taken of export from a new Member State to the enlarged Community, which would have given rise before anlargement to payment to the Community of a levy, it would give rise since 1973 to payment of a compensatory amount. But this cannot be higher than the levy on third countries paid to the orginal Member States, for otherwise the new Member could not export. As a corollary for the export from the original Community to a new Member State, that is to say in general from an area of high prices to an area of lower prices, there is not payment but grant of a compensatory amount, and it is then necessary to see that this compensatory amount does not place the product from the exporting Member State in a ‘too preferential’ position in relation to similar products from third countries. This is understood likewise in the light of the principles of GATT; if a compensatory amount were automatically paid, the exporting Member State could supply at less than world prices, which would seem difficult to justify (dumping). c. The Council rejects the three complaints by the applicant against Article 55 (6). There is no incompatibility between this provision and Articles 51 and 52. The first complaint is based on a false analysis since it exaggerates the rigidity of the Community mechanism in price fixing. The Council contends, as regards the second complaint, that even if the first paragraph of Article 55 (6) prohibits Community preference during the transitional period — and the Council doubts whether it has in fact such scope — there is nothing in this incompatible with Article 51 and 52, but only an express derogating provision in the Treaty as ratified. The Council recalls that the third complaint against the first paragraph of Article 55 (6) is that this provision is inapplicable if advance fixing is not introduced simultaneously. As regards wheat and barley, advance fixing was done by the original Community but only for a short term, in the present case, two months. It is therefore possible to take the view that advance fixing of compensatory amounts which would have been made only for this same period does not have the scope which the applicant attributes to it. The Council stresses that, since the Act of Accession was not in force in 1972, the mechanism of advance fixing could not be applied in a binding manner for the contracts in question here. d. The Council examines the implementation of Articles 51, 52 and 55 and first of all the extension to the new Member States of the common agricultural policy. It stresses that before the Treaty of Accession came into force there was no possibility of issuing texts implementing it. There is however a need to indicate the level of the compensatory amount arising under Article 55 (1). This is the reason for the Resolution to which was annexed the draft regulation formally to be issued after the accession of the new Member States. It is a question only of indicating the terms where the application of the Act of Accession requires the Community to establish certain facts. Although there is no such necessity with regard to the provisions of Article 55 (6), which the applicant recognizes as being self-executing, the same is not true of Article 55 (1) and (2). The Council is therefore justified in indicating the compensatory amounts, which incidentally, Regulation No 229/73 was not meant to alter, without drawing attention to the possibility that the other provisions might apply. The Council states moreover that in the Resolution it has indicated that the compensatory amounts were an application of Article 55 and that at no time was the first paragraph of Article 55 (6) admitted to be ruled out. The Council then examines the differences between the Resolution of July 1972 and Regulation No 229/73. It states that the applicant complains about the differences between the regulation and the draft of July 1972 and not about its provisions since the applicant recognizes their validity. The differences relate to three articles: Article 7 (establishment of the so-called scale system), Article 6 (possibility of instituting a system of advance fixing)and Article 9 (publication of the effective compensatory amounts). None of these complaints is consistent, for these innovations, save perhaps the third, do not constitute implementing measures of the first paragraph of Article 55 (6). Neither Article 7 nor Article 6 depend directly on the first paragraph of Article 55 (6) nor do they determine the application of it. On the contrary they rather have the effect of tempering the full force of it and in this respect they relate to the second paragraph rather than the first paragraph of Article 55 (6). Therefore the Council does not see how they are responsible for the applicant's damage. e. The Council then considers the power of derogation provided for in the second paragraph of Article 55 (6). It stresses that no application for derogation has been made either by the applicant or by anyone else. It considers moreover that it would not have been able, save in the event where an actual danger of deflection of trade or distortion of competition was submitted to it, to give a general scope to the power of derogation in the second paragraph of Article 55 (6). f. In these circumstances the legal basis of liability on the part of the Community has not been established. It states that in support of the alleged liability of the Community by reason of incorrect information or promises which have not been kept, the applicant bases itself, on the one hand, solely on French administrative case-law and on the other hand on the judgment of the Court in the case of Kampfmeyer. In the Council's opinion Article 215 constitutes an obstacle to the argument seeking to draw a legal principle from a single Member State. However this may be, an examination of the French case-law shows that its remedies do not lead in the present case to a declaration of liability on the part of the Community. The Council states, in particular that in French law liability on the part of the administration for false information or promises not kept is recognized only where the party wronged relies on a ‘document’ addressed to it personally and formally communicating to it the information or promise. In the Council's opinion the case-law of this Court in regard to information or promises would appear to be no different. It refers to judgments of this Court of 9 December 1965, Usines de la Providence ([1965] ECR 911) and of 28 May 1970, Richez Parise (Rec. 1970, p. 325). As regards the judgment in Kampfmeyer, the Council states that it was the illegality of the Commission's decision of 3 October 1963 which had constituted the administrative misconduct so as to make the Community liable. It would therefore seem difficult to regard this judgment as a legal precedent for liability for false information. The Council states further that according to the case-law of the Court (Commission v Luxembourg and Belgium [1964] ECR 625) the Council Resolution of 20 July 1972 is without any legal effect of its own, so that in the absence of any special undertaking with regard to the applicant capable of making up for this lack of legal effect there remains only Regulation No 229/73. In regard to this the Community could be liable only in virtue of the case-law of the Court for compensation for damage arising from the exercise of legislative power involving the choice of economic policy. The Council is of the opinion that the conditions giving rise to liability on its part are not fulfilled. g. The Council considers that it has shown that it is not liable so that the question of the chain of causation, the directness of the damage, does not seem to it to require to be examined. It therefore reserves the right to deal, only should it be necessary, with the examination of the figures, which in any event an examination of the commercial documents submitted by the applicant in support of its claim for compensation would require. It also reserves the right to request investigation with regard to the operations in question.
Oral procedure
During the oral procedure on 13 March 1974 the parties raised new facts which are summarized as follows:
The applicant stated that the increase in world prices at the time varied. There were increases and reductions and a general tendency to increase without it being absolutely uniform. It also stated that, at the time, the refund on export to third countries could be fixed in advance for a period of six months and that it was only later that this period was reduced to two months.
The Council, in reply to a question from the Court, stated that the Resolution of 20 July 1972 could not be regarded as a reply to actual requests from commercial operators. Likewise in reply to a question from the Court, it explained the meaning of Article 6 of the draft regulation of 20 July 1972 according to which the compensatory amount is that applicable on the day of import or export.
The Advocate-General delivered his opinion on 3 April 1974.
Further procedure
By order dated 8 May 1974 the Court ordered the procedure to be re-opened. Referring to the fact that the Council in its statement of defence reserved the right, should it be necessary, subsequently to go into the question of the alleged damage suffered by the applicant, including the question of the existence of a chain of causation between the conduct of the Council and the damage which the applicant claimed, the Court considered it necessary to have the observations of the parties on the questions reserved.
The observations of the Council were filed on 17 June 1974 and those of the applicant on 16 September 1974. These observations may be summarized as follows:
1) The Council contends that there is no chain of causation between its conduct and the damage alleged by the applicant. The damage was the consequence of the imprudence of the applicant having regard to the short-term economic situation, the consequences of which could not have been unknown. The Council sees the problem of causation in terms of the different hypotheses giving rise to liability on its part. The first case would be where there was an undertaking — a promise in the proper legal sense — by the Community administration with regard to the company. This case is dismissed by the Council. The Resolution of 20 July 1972 could not constitute a promise addressed to the applicant upon the basis of which it altered its position and thus had a personal right. And it had never been alleged that, independently of the Resolution of 20 July, the applicant had received from the Community administration any assurance equivalent to a promise by the Council. The Council then considers the case of liability arising by information such as to mislead persons concerned as to the intentions of the administration so that the principle of legitimate expectation is disregarded. It denies that the Resolution of 20 July was in the nature of an inducement to develop exports to the United Kingdom. It is not established that the parties concerned were not disposed to maintain and develop their commercial relations with that country. This accorded with Community policy, which already granted higher refunds for exports to certain countries, in particular the United Kingdom, than for exports to other countries. What was to be feared at the beginning of the 1972/1973 marketing year was that the prolonged ignorance in which the parties concerned were liable to find themselves as to the conditions in which their commercial relations would henceforth be conducted, might influence their decisions. It would be wrong to assimilate a measure intended to remedy this possibility with a measure of encouragement. According to the Council it is less in the Resolution that the applicant finds encouragement than in the conduct of the Council whose desire to encourage trade with the United Kingdom was put into practice by fixing the refunds. In this respect the Council notes that the use it made of its legislative power between 20 July and the date of the final regulation provides no such evidence. It stresses on the other hand that the conduct of the Community was apparent from the figures, that is the amount of refunds These figures show that any encouragement to export was completely withdrawn by the Commission by its Regulation No 1984/72 of 15 September 1972 (OJ L 213) which abolished the refund on the cereals in question as from 16 September 1972. The Council recalls that the contracts in question were entered into between 22 and 26 September 1972. It finally examines the case of liability arising from misconduct in respect of information. It refers to the case-law of the Court relating to causation, in particular the judgment of 16 December in Case 36/62 Société des Aciéries du Temple v High Authority of the ECSC ([1965] ECR 289), where the Court expressed itself thus: ‘One must ask not whether the conduct of the defendant in fact caused the error, but whether it could and should have caused such an error in the mind of a prudent person’. The Council contends that the true cause of the damage claimed is the error of the applicant, linked with its imprudence. The error of the applicant is entirely its own fault. The Resolution of 20 July 1972 ought not to and could not have created any doubt and even less any certitude in the mind of the applicant. The system of ceilings was expressly contained in the Act of Accession and according to its own admissions the applicant was not unaware of it. Nor could it fail to understand the reasons behind the system established by the Act of Accession which bound the authority charged with applying it and which could not fail to dominate the interpretation of the implementation measures announced. The Council considers moreover that the three letters dated 12 and 18 October and 18 December 1972 from the applicant to the Office National lnterprofessionnel in Paris show that the applicant did not have any doubts as to the consequences of the movement of prices. On the question of advance fixing the Council states that a prudent operator could not be unaware that the grant of refunds was not obligatory and that in certain cases of fluctuation in the market protective measures could be taken which could go as far as the imposition of a levy on export. The Council concludes that the certainty on which the applicant has founded its arguments does not have the absolute character which the applicant has claimed for it. The Council considers whether the applicant has acted as a prudent operator. It contends that there are strong reasons for doubting the applicant's prudence both as to the date of the conclusion of the contracts and as to their conditions. As regards the date of the signing of the contracts, the Council observes that the applicant chose to conclude them precisely at the time when fears of too large an export demand gave rise in the Community to measures intended to discourage exports. It refers to the fact that 66 times more certificates for barley were issued for France during the period from 1 to 25 August than for the period from 26 August to 19 September 1972. According to the Council these figures show that the interpretation of the Resolution claimed by the applicant hat not been shared by its competitors. As regards the conditions of the contracts and in particular compensatory amounts, the Council states that a prudent person could not expect to obtain as from 1 February 1973 the advantages of fixed compensation while flexibility and even the possibility of complete suspension of the refunds had been provided for the previous period. The Council notes that of 108900 metric tons sold, 51150 metric ton? were to be delivered in February and 37150 in March. If the company had sold for delivery in January it would have received nothing. The Council raises the question whether the company could really believe that by delaying delivery until February it would receive 42 u.a./t. As regards the level of prices at which the contracts were concluded, the Council contends that the terms of the contracts show that the applicant had reserved an excessive profit margin. The prices allowed a margin of £4·90 and £6·01 whereas it ought to have been normally of £0·50. The Council concludes that the applicant took risks which gave an objectively speculative character to the operation. As regards the damages, the Council states that it could not, with the facts produced by the applicant, go into the details of its calculations, and that it is therefore dealing only with the questions of principle raised by this aspect of the application. The Council recalls that the contracts provided for the company delivering 10 % more or less than the amount stated and it alleges that the applicant could have used this clause to limit its losses. The Council also states, in a general way, that the damages have been calculated neither as a real loss nor even as a loss of profit, but as a loss of opportunity assessed at its maximum value, which is not admissible. The profit margin, which was 13 u.a. per metric ton, should in any case be deducted from the alleged loss which under this head should be reduced from 129196·52 u.a. to 46705 u.a. The Council seeks proof of all the figures and adds that it would be important to know whether the company is covered, a fact which does not appear from the file.
2) The applicant states that the supplementary observations of the Council continue the arguments already put forward and these arguments distort the basic question of the liability of Community institutions. It also states that the observations of the Council contain serious inaccuracies. It mentions only some of these inaccuracies which characterize the Council's defence. It is first of all a serious error on the Council's part systematically to equate the system of refunds which depends on the movement of world prices with the system of compensatory amounts established for the accession and intended to create a single market and a privileged pattern of trade between the Community as originally constituted and the new Member States. The applicant states that although refunds had sagged in October, they had not ceased to climb up again until December. This was why it was wrong to claim that the Council was opposed to exports to Britain. The applicant rejects the Council's proposition according to which the date of the transaction had an influence on its course Under the advance fixing system the amount of the refunds on signing the contract or when the transactions were to be effected was of little importance. It was precisely to avoid the repercussions of market vagaries that the Community had established the protection of fixing. The applicant reasserts that it would be wrong to claim that the Resolution of 20 July 1972 was merely for information. The Council sougth by publishing it to achieve something; the cereal marketing year, subject as regards trade with the new Member State to two fundamentally different systems, had nevertheless to function harmoniously; the Council addressed itself to a category of operators from whom it expected a response in the form of action: the maintenance and even strengthening of the privileged pattern of trade. The applicant states that it is wrong to imagine that when cereal operators enter into their contracts for each marketing year they take into account the foreseeable errors on the part of the Community institutions. It sets out the exact structure of its prices and the very limited nature of its profit margins — 0·62 FF per 100 kg — inherent in a market characterized by very strong competition. After having stated these points of disagreement with the oberservations of the Council, the applicant attempts to establish the actual damages which it has suffered and the chain of causation between the Council's action and the damages by analysing in turn the Community mechanisms, the Council's liability, the practical aspects of cereal trade and the operations in question in the present proceedings. It shows that the damage is directly associated with the conduct of the administration, which suffices in the case of a promise to give rise to liability on the part of the Council. It reiterates the arguments already advanced during the first stage of the proceedings relating to the reliance which it placed on the fact that the compensatory amounts provided for by the Resolution of 20 July were fixed. Under the Act of Accession the Council had the choice between fixing and flexibility. It chose to fix, as appeared from the absence in the Resolution and the annexed draft of any reference to Article 55 (6). These texts are clear: the compensatory amounts would be fixed. Moreover, under the second paragraph of Article 55 (6) the application of the provision of the first paragraph could be dispensed with, at least as regards existing contracts. The application of paragraph (6) has been shown to be prejudicial to Community preference and is of a nature to give rise to deflections of trade to the advantage of operators from third countries. The applicants attitude would have been different if the possibility of the application of this paragraph had been suggested In this event it would certainly not have contracted with its British purchasers. Only the advance fixing of the compensatory amount, established at the same time, would then have made it possible to conclude contracts. As regards the Council's reference to Article 6 of the draft regulation, it states that this article does not suggest the application of Article 55 (6). This article is too general to fulfil such a role. It obviously applies to changes in marketing years. The applicant then endeavours to refute the Council's argument that the compensatory amounts laid down by the texts of July 1972 represented ‘a ceiling’ or a ‘maximum possibility’. The Council ends up by caricaturing its own attitude by thus endeavouring to introduce an element of hazard which is not only contrary to its intentions, which were to avoid any risk, but is also alien to the concept of international trade, which can only develop if the risks are calculable and can be judged. The applicant states that the observations of the Council show that it does not appreciate the daily practice of the cereal market. The applicant states that almost a third of wheat exports from France during the period from 1 August 1972 to 31 January 1973 was destined for Britain. It states moreover that most export certificates for wheat were taken up at the time of the low refund (27 September to 24 October 1972), which shows that there is no direct relationship between the fixing of the refunds on the one hand and the number of certificates taken up on the other. The applicant finally examines the operation which is the subject of the proceedings and the conditions of the contract. It stresses that it had concluded the contracts at the date when its usual British customers had been the buyers. The fact that the date of the contracts coincided with an appreciable lowering in the refund was of no consequence. The amount of the refund on the date when the contract was entered into is of no consequence to the operator who has fixed it in advance or has been assured that it is fixed. The applicant denies that it delayed deliveries by a month. Since the contracts were registered in Britain with the Home Grown Cereals Authority, they cannot be altered to suit the convenience of one or other party. It preferred to export during the first period of the marketing year. It used for this purpose export certificates fixed in advance in August at the time when the refund was high. It rejects the Council's complaint regarding its alleged ‘passivity’. It has been in permanent contact with the French and Community authorities. However, it has not been able to obtain any satisfactory reply since the Council and Commission have revealed themselves helpless when faced with a situation which they had not foreseen. The applicant therefore is of the opinion that it has demonstrated that it has acted with the greatest prudence when entering into the contracts. It moreover thinks that it has already shown in its action to what extent it has endeavoured to reduce its loss. The Council can scarcely be unaware of it. Its detailed objections are purely formal since they do not agree with the facts. However, the applicant refers to a typical argument of this lack of awareness. When a contract is concluded with the possibility of delivery ‘10 % more or less’, this is to enable the contract to be executed having regard to the variation in the capacity of the transport. This tolerance does not give the supplier freedom to vary the quantities according to the price. During a further oral procedure on 12 November 1974 the parties introduced new facts which are summarized as follows: The applicant in reply to a question from the Court states that it is simply asking for compensation for damage arising from the alteration of the compensatory amount by the regulation of 31 January 1973. It is seeking only compensation for damnum emergens and not for lucrum cessans, as appears from the tables it has submitted to the Court. The Council observes that the figures given by the applicant relating to the taking up of export certificates during the period from 27 September to 24 October 1972 should be altered. It refers to the fact that a part of the certificates relates to food aid and does not give rise to refunds and that by far the most certificates were lodged during August to obtain an option and only confirmed during the period in question. The Council denies that Article 6 of the draft regulation applies to changes of marketing year and it refers to what it has done to change the compensatory amounts at the beginning of the 1973/1974 marketing year. Thus Regulation No 1967/73 of 17 July 1973 amending Regulation No 229/73 (OJ L 201/8 of 21 July 1973) does not refer to Article 6. As regards the applicant's claim that it has preferred to export during the first period of the marketing year because it could use the export certificates fixed in advance in August, the Council states that the applicant could have used these certificates for placing the goods in storage and if it did not do so it was because it wanted to use them for other very profitable operations. The applicant in reply states that it could not have used the certificates fixed in advance for exports to Britain since this country does not have the necessary warehouses. The Advocate-General delivered a second opinion on 5 December 1974.
Law
1. The application lodged on 28 September 1973 seeks an order against the European Economic Community for the payment of FF 5728660·17 as compensation for damage the applicant claims to have suffered as a result of the system of compensatory amounts established by Article 55 of the Act annexed to the Treaty of 22 January 1972 concerning the accession of the new Member States to the Communities.
2. Articles 55 (1) (a) provides that in trade in certain agricultural products compensatory amounts shall be levied by the importing State and granted by the exporting State in order to compensate the differences in price levels which may exist until 1 January 1978 between the new Member States and the Community as originally constituted.
3. Article 56 (6), however, provides that the compensatory amount levied or granted by a Member State may not exceed the total amount levied by that Member State on imports from third countries, but at the same time the second paragraph gives the Council the power, on a proposal from the Commission, to derogate from this rule, in particular in order to avoid deflections of trade and distortions of competition.
4. In view of the fact that the Community rules in agriculture would apply to the new Member States as from 1 February 1973 and that the transitional measures provided for the adaptation of these States to the Community rules necessitated implementing measures, the Council, by Resolution dated 20 July 1972, agreed on a draft regulation which was to be formally adopted immediately after the entry into force of the Treaty of Accession and the text of which was annexed to the Resolution.
5. The fourth recital to the Resolution stated that it was essential that persons with an economic interest should have knowledge of the content of the implementing provisions forthwith in order to enable the transition from the national systems in the new Member States to the Community system to be carried out under the best possible conditions.
6. For trade with the United Kingdom the draft provided until 31 July 1973 a compensatory amount of 42·33 u.a. per metric ton for barley, which was also the amount applicable to denatured common wheat.
7. The draft contained no provision dealing expressly with the situation provided for in Article 55 (6) of the Act of Accession.
8. The Resolution, with the draft regulation annexed, was published in the Official Journal of the European Communities of 10 August 1972 in the C section under the heading ‘Information’.
9. Regulation No 229/73 of the Council of 31 January 1973 laying down general rules for the system of compensatory amounts for cereals, while fixing these amounts as provided for in the draft annexed to the resolution of 20 July 1972, expressly provided, in accordance with Article 55 (6) of the Act of Accession, that if the levy is lower than the compensatory amount, the Commission should apply the scale set out in the annex to the regulation to determine the amount applicable by way of compensatory amount.
10. On the basis of these provisions and following the increase in prices on the world market since the summer of 1972 the compensatory amounts actually applied since 1 February 1973 were lower than the amounts provided for by the draft regulation annexed to the Resolution of 20 July 1972.
11. In view of the Resolution of 20 July 1972 the applicant concluded during September 1972 contracts for export to the United Kingdom of barley and denatured wheat, the delivery of which was to take place between February and June 1973.
12. Since the applicant was not able to receive the amounts expected, it had to perform some of these contracts at a loss while others had to be rescinded or revised with the agreement of the purchaser, which likewise involved losses for the applicant.
13. The applicant begins with a general criticism of the system established by Article 55 of the Act of Accession.
14. This criticism relates in particular to the contradiction which exists between paragraphs 1 and 2 providing fixed compensatory amounts on the one hand, and paragraph 6 on the other hand, which introduces a flexible factor, and thus uncertainty, in that it provides that the compensatory amounts should vary according to the levies on imports from third countries, without it being possible to eliminate this uncertainty by means of advance fixing of the compensatory amounts in the manner of the system of advance fixing of the refunds applicable to exports to third countries.
15. Further, the system of variable compensatory amounts under paragraph 6 has the practical effect, in the new Member States and in a rising world market, of favouring imports of cereals from third countries in relation to those from the original Member States, which conflicts with the principle of Community preference which is at the basis of the common organization of the agricultural markets.
16. Since, however, the possible effects to which reference is made result not from the conduct of the Council but from the Act of Accession itself, which is an integral part of the Treaty concluded between the original and the new Member States, they cannot give rise to non-contractual liability on the part of the Community.
17. The applicant complains that the Council encouraged it, by the Resolution of 20 July 1972, to conclude contracts within the framework of a system involving fixed compensatory amounts, and then, by Regulation No 229/73, abandoned this system in favour of flexible compensatory amounts.
18. It is right to observe in this respect that the flexibility of the compensatory amounts results from the first paragraph of Article 55 (6) of the Act of Accession, according to which these amounts could not exceed the total amount levied on imports from third countries.
19. This provision applies automatically, so that it is not possible, by reason of the fact that the Resolution and the draft regulation annexed did not mention it, to impute to the Council an intention not to apply it.
20. Nevertheless, since the Council adopted the abovementioned Resolution with the object of informing and guiding commercial operators, it ought to have issued a reminder as to the provision in question and expressed reservations as to its possible application.
21. The omission to make the Resolution subject to such reservations, while explicable by the situation of the world market at the time, when the subsequent increase in prices was not yet foreseeable, was likely to distort the task of informing which the Council had assumed and was such as to make it liable.
22. It is right, however, to inquire whether there is a chain of causation between the behaviour of the Council and the alleged damage.
23. One must ask not only whether the conduct in fact caused the wrong impression on the applicant's part that the compensatory amounts would remain fixed in spite of Article 55 (6), but also whether it could and should have caused such an error in the mind of a prudent person.
24. It must be remembered that the contracts in question were concluded on 22, 25 and 26 September 1972.
25. Following the movement of prices on the world market the levies on imports from third countries began to be reduced at the beginning of August 1972, and reached, at the end of the month, a figure which, as regards barley, was lower than the compensatory amount provided for trade with the United Kingdom.
26. Regulation No 1847/72 of the Commission of 28 August 1972 (OJ L 197 of 29. 8. 1972, p. 1) fixed the levy at 40·74 u.a. per metric ton whereas the compensatory amount provided for by the draft regulation annexed to the Resolution of 20 July was 42·33 u.a. per metric ton.
27. The movement in prices moreover led the Commission to abolish, as from 16 September, refunds for cereals exports to third countries, including at the time the United Kingdom (Regulation No 1984/72 of the Commission of 15 September 1972, OJ L 213 of 16. 9. 1972, p. 12).
28. The applicant, as a prudent exporter, fully informed of the conditions of the market, was not unaware and in any event could not be unaware that such was the position at the time the contracts were concluded, and of the consequences which would result therefrom as regards the compensatory amounts.
29. Its subsequent correspondence with the Office National Interprofessionnel des Céréales, moreover, leaves no doubt in this respect.
30. With regard to this, mention may be made in particular of its letter of 12 October 1972, in which it expresses itself thus: ‘… following a price movement which was as unforeseeable as it is exceptional… the Community levies risk being lower than the compensatory amounts. The latter are liable to be revised so that they do not exceed the levy in force; this follows from Articles 55 and 56 of the Act of Accession.’
31. This letter confirms that the applicant was effectively in a position to appreciate the effect which an alteration in the conditions of the market could have on the application of the Articles referred to.
32. Accordingly the damage alleged has not been caused by the conduct of the Council.
33. The application must therefore be dismissed.
Costs
34. The applicant has failed in its application.
35. Under Article 69 (3) of the Rules of Procedure, where the circumstances are exceptional, the Court may order that the parties bear their own costs.
36. In the present case the Court has found that the conduct of the Council was such as to make the Community liable.
37. It is proper in the circumstances that the parties bear their own costs.
On those grounds, THE COURT hereby:
1 Dismisses the application;
2 Orders each party to bear its own costs.
1 Advance fixing was instituted by Regulation No 3280/73 of 4. 12. 1973, OJ L 337/73 of 6. 12. 1973).