JUDGMENT OF 27. 5. 1975 — CASE 2/75 EINFUHR- UND VORRATSSTELLE GETREIDE v MACKPRANG

In Case 2/75 Reference to the Court for a preliminary ruling under Article 177 of the EEC Treaty by the Bundesgerichtshof in a case pending before that court between

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

gives the following

JUDGMENT

Facts

The facts and procedure of the case and the observations submitted pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the EEC may be summarized as follows:

I — Facts and procedure

During Spring of 1969 the fall in the forward rate of inter alia the French franc provided all those who resold to the German intervention agency cereals purchased in France with an opportunity to make a considerable profit on the exchange rate. As a result there was an intense ‘intervention trade’ which gave rise to such substantial deliveries of French cereals to the German intervention agency that the capacity for storing and taking charge of the latter was rapidly exhausted and there were grounds for fearing a collapse of the intervention system in Germany insofar as the cereal sector was concerned.

In response to a request addressed to it on 2 May 1969 by the competent German authorities the Commission, by Decision No 69/138/EEC of 8 May 1969 (OJ L 112 of 9. 5. 1969) authorized the Federal Republic of Germany temporarily to limit its intervention in respect of common wheat and of barley to cereals harvested in that Member State. Identical decisions were at the same time taken in the case of Belgium and the Netherlands.

The authorization amounted to a derogation from the provisions of Articles 4 and 7 of Regulation no 120/67 of the Council of 13 June 1967, on the common organization of the market in cereals (OJ No 117 of 19. 6. 1967) according to which the intervention agencies are obliged to buy in common wheat and barley harvested in the Community which are offered to them. Consequent upon this Decision, the Einfuhr- und Vorratsstelle für Getreide und Futtermittel, the German intervention agency, informed the interested parties by an official notice, published in the ‘Bundesanzeiger’, that as from 8 May 1969 that agency would no longer accept offers for intervention on common wheat and barley, unless harvested in the Federal Republic. Cereals offered to the intervention agency before 8 May 1969 at 6.40 p.m., the time of coming into force of the aforementioned Decision, were expressly excluded from this regulation.

By decree of 17 June 1969, published in the ‘Bundesanzeiger’ on 19 June 1969, the competent Minister, the Federal Minister of Food, Agriculture and Forestry, confirmed this measure, giving it a retroactive effect to 9 May 1969 at 8.45 a.m.

On 6 May 1969 Firma Mackprang, who are cereal merchants, offered to the Einfuhr- und Vorratsstelle eight lots in all of common wheat harvested in France for intervention. At the same time Firma Mackprang stated that the wheat in question was at present at various places in the Federal Republic. In fact however all the lots were still in transit from France to the Federal Republic.

On 8 May 1969 the Einfuhr-und Vorratsstelle accepted the offers; subsequently however it refused to accept the deliveries effected on 8, 10, 12, 13 and 17 May 1969 to the aforementioned warehouses, relying in respect of those occasions on the aforementioned provisions.

Firma Mackprang claimed compensation for the damage which it had been caused by reason of the refusal to accept the wheat offered for intervention.

The lower courts having given conflicting judgments, the proceedings are now pending before the Bundesgerichtshof, which by order of 21 October 1974 under Article 177 of the EEC Treaty referred the following questions for a preliminary ruling:

1) Is the Decision of the Commission of the European Communities of 8 May 1969 — 69/138/EEC set forth in the Official Journal of the European Communities of 9 May 1969 No L 112, p. 1 — concerning the authorization granted to the Federal Republic of Germany to limit intervention on certain cereals valid in respect of cereals harvested in other Member States of the Community which on 8 May 1969 were already in transit to the Federal Republic of Germany and in respect of which an offer in proper form was not made to the intervention agency until after that date?

2) If so: Is the abovementioned Decision of the Commission valid in respect of such cereals which were already in transit on 2 May 1969?

The order of the Bundesgerichtshof was registered at the Court of Justice on 6 January 1975.

In accordance with Article 20 of the Protocol on the Statute of the Court of Justice of the EEC, written observations were submitted on behalf of the respondent and the appellant in the main action and by the Commission of the European Communities. 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 — Observations submitted to the Court

Firma mackprang, the respondent in the main action, submits that the limitation of purchases by the intervention agencies to cereals harvested in the Federal Republic, decreed by the competent German authorities, constitutes a derogation from the provisions of Articles 4 and 7 of Regulation No 120/67 of the Council of 13 June 1967 (OJ No 117 of 19. 6. 1967) according to which the national intervention agencies are obliged to buy in at the intervention price cereals originating in all the Member States of the EEC. To be effective the German decree of 17. 6. 1969 would therefore have required a valid basis in Community law.

In the opinion of the Einfuhr- und Vorratsstelle, the Comission's Decision of 8 May 1969 (69/138, OJ No 112 of 9. 5. 1969) authorized the Federal Republic of Germany also to exclude from intervention French cereals which on 8 May 1969 were in transit to Germany and which had already been offered for intervention.

When previously faced with questions of Community law raised by the cessation of intervention measures the Court gave judgments in Cases 50/71 (Rec. 1972, p. 53) and 72/72 [1973] ECR 377 interpreting in particular questions concerning the term ‘offer for intervention’ and the conditions required for Article 226 of the EEC Treaty to apply.

However, the Court has never as yet been faced with the question of interpretation and validity of Article 1, second paragraph, of the said Decision of the Commission, according to which the Decision does not apply to cereals offered for intervention before the coming into force of the Decision.

Accordingly, it will be necessary to determine whether the Commission intended also to allow the exclusion from intervention of lots then in transit to the Federal Republic of Germany and already offered for intervention before the coming into force of the Decision. The specific question which arises is whether in using the term ‘offered’ in Article 1, second paragraph of the Decision, the Commission gave in the same meaning as the Court of Justice in its judgment in Case 50/71, almost three years later, gave to the term ‘offer’. In other words, it is necessary to determine whether the Decision of 8 May 1969 had also provided that the goods must physically be in the warehouse accepting responsibility at the time of the offer, or whether the Commission had considered it sufficient for the goods to be in transit to a warehouse accepting responsibility. If the aforementioned provision had to be interpreted as meaning that the Commission had intended to exclude from intervention goods that were in transit, this would give rise to another question, viz, whether so wide an authorization is compatible with the principle of proportionality recognized by Community law.

The provisions of Article 1, second paragraph of the Decision suggest that the Commission refused to authorize protective measures having a retroactive effect. In this way the Commission showed that the confidence of undertakings as to the validity and the continuation of Articles 4 and 7 of Regulation No 120/67 was entitled to protection. Besides, on the basis of the Courts' judgment in Case 13/63 [1963] ECR 165, the Commission had been aware of its obligation to limit its intervention, in the event of the application of Article 226 of the EEC Treaty, to measures that were strictly necessary and preferably to adopt measures causing the least disturbance to the functioning of the common market.

Finally, the Commission cannot have lost sight of the fact that Regulation No 120/67, which repealed Regulation No 19/62, represents an important step towards a common market by abolishing intra-Community barrriers. In order to abolish all obstacles to free movement of goods within the Community, Regulation No 120/67 had restricted the possibility of taking protective measures. Whilst Article 22 of Regulation No 19/62 aforementioned established a system of protective measures as between Member States and vis-à-vis third countries, Article 20 of Regulation No 120/67 limits the possibility of such measures to trade with third countries. Even if the lastmentioned treatment had not excluded the application of Article 226 of the Treaty, the link between the aforementioned regulations makes it obvious that Regulation No 120/67 could not authorize protective measures within the Community which were wider than those permitted by the previous regulation. Article 22 (2), second paragraph, of Regulation No 19/62, however, had in express terms prohibited the application of protective measures to goods in transit. Bearing in mind the fact that Regulation No 120/67 had not intended to create greater possibilities of interference than the preceding regulation, one must admit that the Commission in making its decision had been aware of the limits imposed on the possibility of such interference.

But if the Commission had intended exempting goods whilst in transit, it could not have understood the term ‘offer’ in the sense in which it was subsequently defined by the Court of Justice. For if ‘offer’ within the meaning of the Decision always presupposes the delivery of goods to the warehouse accepting responsibility, goods in transit could never have been ‘offered’ within the meaning of this provision. The discussion as to the correct meaning of the term ‘offer’ could not yet have influenced the intention which the Commission pursued in its Decision of 8 May 1969. The definition given almost three years later by the Court of Justice (Case 50/71, supra) cannot therefore allow a posteriori conclusions to be drawn as to the Commission's intention. On the contrary, one must proceed from the fact that the Commission at that time knew the practice of the Einfuhr- und Vorratsstelle which consistently accepted goods in transit for intervention provided these were subsequently delivered to warehouses accepting responsibility which were determined beforehand. Had the Commission intended to prohibit this practice and to maintain as the decisive criterion the actual delivery of goods, than it ought to have said so expressly in Article 1, second paragraph, of its Decision.

If one interprets the Decision as meaning that the Commission wanted to apply protection measures to cereals which at the time the Decision came into force were in transit, then it will as a subsidiary point be necessary to look into the validity of such a wide authorization.

In the opinion of the respondent in the national proceedings such an authorization would be contrary to the prohibition on taking measures which are excessive in relation to the objects pursued (Ubermaßverbot) and is not covered by Article .226 of the Treaty. In case of application of Article 226 and 115 of the Treaty — containing authorizations to derogate — the Commission is obliged to respect the principle of proportionality. The aforementioned provisions must be interpreted and applied in a strict manner, all the more so at a time when the principle of free movement of goods within the Community applies without restriction to the goods in question. Under these circumstances if it were to grant an authorization to take protection measures in relation to operations which are of neglible importance for the functioning of the Common Market, the Commission would step outside the limits of its enabling power.

The application of these principles shows that the Commission cannot by its Decision have permitted the exclusion of French cereals in transit to the Federal Republic from the benefit of intervention. At the time of coming into force of the said Decision the quantity of cereals in question amounted at the most to 12000 metric tons. These quantities of cereals did not threaten the market since such quantity represents only a minute fraction of the total amount of cereals which each month arrive in the Federal Republic from France.

It is precisely in connexion with lots in transit that the confidence of traders is entitled to protection. They purchased cereals before the date of the Decision relying on the continued existence of Articles 4 and 7 of Regulation No 120/67. The importers were therefore bound by their bargains and the contracts to carry already concluded. By reason of the special confidence which was justified by the circumstances the Commission ought to have granted additional time to the importers so as to allow them to deliver to intervention goods that were already irrevocable in transit to the Federal Republic of Germany.

Since the respondent had consigned and offered to the Einfuhr- und Vorratsstelle all the lots in question in this action before 8 May 1969 — certain lots were already in transit on 2 May 1969 — these lots cannot be affected by the protection measures.

A correct interpretation of the Commission's Decision shows that it did not refer to these lots; had it intended to refer to them then it would as regards these lots be without effect, for it would violate the prohibition on measures that are excessive having regard to the object to be pursued (Übermaßverbot).

The Einfuhr- und Vorratsstelle, the appellant in the national proceedings, considers that two points, above all, are of importance when interpreting Article 1 of the Commission's Decision of 8 May 1969.

Firstly, one must bear in mind the economic background resulting in this Decision. Secondly, one must know to what extent one can speak of an effective offer to intervention before the coming into force of that Decision. Since the fall in the value of the French franc which took place in Spring 1969 allowed cereal merchants to re-sell their French cereals in Germany with an appreciable profit on exchange, this resulted in massive offer of cereals at prices below the intervention price expressed in German Marks, and this resulted in largely forcing homegrown cereals off the German market, so that they were presented to intervention in excessive quantities. Merchants had even offered substantial quantities of French cereals direct to German intervention in order to be able to profit from the difference between the intervention price expressed in French francs and German Marks respectively.

In these circumstances the Commission authorized the Federal Republic of Germany to take the necessary protective measures. In order to adopt a measure that would involve the least disturbance to the functioning of the Common Market the Commission granted authorization to exclude from the purchase: under Article 7 (1) of Regulation No 120/67 wheat and barley which had entered Germany in the circumstances referred to (Official Notice). From these facts alone one could already conclude that cereals which had not yet arrived in Germany at the date of the Decision ought all the more to be excluded from the obligation to purchase when the legal situation was not yet protected. It follows precisely from the ‘ratio’ of the Commission's Decision that the so-called ‘floating’ cereals must be excluded from compulsory intervention so as to prevent speculation on the difference in intervention prices following upon the fall in the value of French currency. It is the raison d'etre of the intervention system — having regard to the regionalization of prices — to provide producers with a market for their cereals at reasonable prices where there are no markets available providing normal profit margins.

The appellant refers to the Court's case-law on the interpretation of Article 1 (1) of Regulation No 132/67 of the Council of 13 June 1967 (OJ No 120 of 21. 6. 1967). In Case 49/71 (Rec. 1972, p. 23) the Court declared that intervention agencies must take precautions to ensure that there is no inducement to transport goods solely with a view to obtaining more favourable intervention terms. This applies a fortiori in an exceptional situation where cereal merchants speculated on the difference between intervention prices expressed in French francs and German Marks respectively.

It was therefore necessary to release the Federal Republic of Germany from the obligation to purchase in all those cases where an effective offer to intervention had not yet been made. The very purpose of the Commission's Decision was to prevent French cereals being transported to Germany with a view solely to their being brought into intervention. Pursuant to Regulation No 120/67 of the Council the purpose of intervention is to stabilize the markets and to ensure a fair standard of living for the agricultural population. The interest of merchants in achieving the maximum profit by speculative operations on exchange rates does not require protection.

As regards the legality of the Decision of 8 May 1969 the appellant relies on the judgment given by the Court in Case 72/72 [1973] ECR 377. The supplementary question is merely whether the restriction on the obligation to intervene in respect of cereals in transit can lawfully extend to them. If it is not admitted that the Court has already ruled on this question in Case 49/71, the following observations must be made:

The validity of the Commission's Decision cannot be contested by arguing that under normal conditions and applying Regulation No 120/67, so-called floating ‘goods’ are not allowed to be offered to intervention, given the fact that exceptional economic difficulties had brought about this Decision.

In Case 49/71 it has already been stated by the Court that Regulation No 132/67 imposes a binding duty upon intervention agencies, for reasons connected with as efficient and as economical an organization of the intervention system as possible, at any rate to verify whether the marketing centre chosen is one of the three centres nearest to the place where the cereals are when the offer is made. Moreover, in the same case the Court found that ‘the obligation to specify the place where the goods are at the time when the offer is made, and to keep them there at the intervention agency's disposal, allowing the latter to verify that the offer was properly made and, if so, allowing it the initiative of itself specifying the place where they are to be taken in charge, contributes to the attainment of this objective’.

One must conclude therefrom that in conformity with Article 1, second paragraph, of the Decision of 8 May 1969 cereals which at the date of the Decision were still in transit could not validly be offered to intervention agencies before the coming into force of that Decision. Accordingly, these cereals fall within the ambit of the authorization given to the Federal Republic of Germany.

According to the appellant in the national proceedings the Commission's Decision is equally valid insofar as it authorizes the Federal Republic of Germany to exclude from intervention cereals harvested in other Member States which were still on 8 May 1969, or from 2 May 1969, in transit to the Federal Republic of Germany and for which an offer in due form was not made to the intervention agency until after 8 May 1969.

The Commission argues that the question posed by the Bundesgerichtshof cannot be concerned with the validity of the Decision of 8 May 1969, this validity not being in doubt since the judgment given by the Court of Justice in Case 72/72. The present questions rather bear on the correct interpretation of Article 1, second paragraph, of the said Decision.

It appears from this provision that it was intended to exclude from the limitation on purchase those transactions in respect of which the general obligation to intervene and to purchase had already in the case of the offeror crystallized into a subjective right entitled to protection, to have his goods purchased and taken in charge by the intervention agency. According to the implementing provisions relating to the intervention system in the sector of cereals (Regulation No 132/67 of the Council of 13 June 1967, OJ No 120 of 21. 6. 1967 and Regulation No 1028/68 of the Commission of 19 July 1968, OJ L 176 of 23. 7. 1968) the vendor acquired such a right by addressing a written offer to the competent intervention agency. Such a right nevertheless presupposes an offer in proper form, in conformity with the provisions in force.

The respondent as from 6 May 1969 offered to intervention lots of cereals not yet in the specified warehouses of the intervention agency but in transit at an unknown place. At that moment the offers did not bind the appellant since they were contrary to the provisions relating to the intervention system. The definition of the term ‘offer’ given by the Court of Justice (Judgments in Cases 49/71 and 50/71) confirm this opinion. The invalid offers made on 6 May 1969 did not therefore confer on the respondent in the national proceedings any right to have his cereals purchased and taken in charge; they therefore did not confer any legal position upon him. Had the respondent maintained his offers these could have become effective and bound the appellant at the moment when the lots of cereals in question reached the prescribed warehouses. In order to come within the provisions of Article 1, second paragraph, of the Decision of 8 May 1969 this would necessarily have had to be before 8 May 1969 at 6.40 p.m. This is a question of fact to be decided by the competent national courts.

The circumstances of the national proceedings give rise to the further question whether, for reasons connected with the ‘protection of legitimate expectation’ one ought to treat the respondent as if it had in fact offered the lots of cereals in question in good time, so as not to be affected by the limitations placed upon interventions.

Since the judgment given by the Court of Justice in Case 1/73 [1973] ECR 723 there is no doubt that the principle of protection of legitimate expectation may take precedence over acts of Community legislation decreed in the agricultural sector. Nevertheless this is a derogating rule subject to very strict conditions.

The foundation for a protection of legitimate expectation can only be anchored in a rule which has precisely the purpose of protecting the individual subjective interests of the person in question and of guaranteeing to that person, by ensuring continuation in full of the situation from which he benefits, the quiet enjoyment of those interests.

This guaranteed legal situation must relate to infringements of a particularly serious nature. A protection of legitimate expectation is not possible against changes in the legal situation which are to be expected in the light of the applicable provisions and which are inherent to the system in question. Only the legitimate interests of the persons involved are entitled to be and capable of being protected. One must therefore weigh up the public and private interests in question.

In the present case one can draw the following conclusions:

Article 7 (1) of Regulation No 120/67 imposes on intervention agencies throughout the marketing year the obligation to buy in at fixed prices cereals which comply with the conditions laid down. The guaranteed market and price which this provision provides for producers was not discontinued by the authorizing Decision of the Commission. On the contrary, the Decision had the purpose and effect of restoring the efficacy of the intervention system in Germany and continuing there the guarantee of intervention. The respondent in the national proceedings was not deprived of the possibility of benefiting from intervention. It could have offered its cereals acquired in France to the French intervention agencies.

The possibility of offering to the intervention agencies in a Member State wheat harvested in another Member State in no way amounts to an independent guarantee intended for the benefit of trade and upon the continuation of which the applicant was entitled to rely.

The obligation to buy in which is incumbent upon intervention agencies is intended to afford to cereal producers a provisional solution for goods that cannot be marketed at sufficiently high prices. The respondent had not however acquired the cereals in the course of normal transactions and it had not had the intention of marketing them. These consignments of wheat were not covered by the guaranteed marketability provided by the intervention system. It is not reasonable to allow this system tc guarantee an ‘intervention trade’ having no other purpose than to exploit the obligation to purchase so as to make a profit on exchange rates.

After 2 May 1969 it was certain that a solution to the problems bearing down on the cereal market in Germany was being sought at Community level and that a limitation of intervention in favour of home-grown cereals was being sought. Whoever continued in these circumstances to purchase cereals in France in order to assign them to intervention agencies in Germany no longer acted in reliance on the continuation of the obligation to take them in charge, but rather in the hope of still being in time to avoid the intended restrictions. The respondent's interest, which was to make profits on rates of exchange, is not entitled to protection when looked at from the point of view of the public interest in maintaining the efficacy of the intervention system. The respondent's legitimate interest is sufficiently protected by the fact that the Commission had to respect the conditions provided for under Article 226 of the EEC Treaty and in fact did so.

Accordingly, it is not necessary to extend the exception under Article 1, second paragraph, of the authorizing Decision to invalid offers affecting cereals in transit, and to do so would have been contrary to the terms of that provision.

III — Oral procedure

Firma Mackprang, represented by Oliver Brändel, advocate of Karlsruhe, the Einfuhr- und Vorratsstelle, represented by Rudolk Nirk, advocate of Karlsruhe and the Commission of the European Communities, represented by its legal adviser, Peter Kalbe, presented oral arguments at the hearing on 29 April 1975.

The Advocate-General delivered his opinion on 15 May 1975.

Law

1. By order dated 31 October 1974 filed at the Court on 6 January 1975 the Bundesgerichtshof has referred to the Court under Article 177 of the EEC Treaty the question whether Decision No 69/138/EEC of the Commission of 8 May 1969 authorizing the Federal Republic of Germany to limit its interventions to certain cereals (OJ L 112, p. 1) is valid in respect of cereals harvested in other Member States of the Community which on 8 May 1969 were already in transit to the Federal Republic of Germany and in respect of which an offer in proper form was not made to the intervention agency until after that date. The Bundesgerichtshof goes on to ask whether, if so, the abovementioned Decision is valid in respect of cereals which were already in transit on 2 May 1969.

2. Since the Decision in question constitutes a derogation from the provisions of Regulation No 120/67 of the Council of 13 June 1967 on the common organization of the market in cereals (OJ No 117 p. 2269) and of Regulation No 132/67 of the Council of 13 June 1967 laying down general rules for intervention on the market in cereals (OJ No 120, p. 2364), it must be interpreted in the light of the objectives pursued by those regulations.

3. The intervention system was set up with a view to guaranteeing to producers, having regard to the regionalization of prices, a market for their cereals at reasonable prices where there are no markets available providing normal profit margins. Whilst Article 1 (1) of Regulation No 132/67 provides that all offers for intervention shall be made to an intervention agency in respect of a marketing centre chosen from among the three centres nearest to the place where the cereals are when the offer is made, it assumes that at the place where the goods are it has not been possible to market them under conditions of normal profit margins. Such a precaution, inspired by the desire to set up as efficient and inexpensive an organization as possible of the intervention system, is necessary in order to avoid any inducement to transport the goods with the sole purpose of obtaining more favourable intervention conditions.

4. Accordingly, the application of the Commission's Decision of 8 May 1969 to offers to intervention of cereals harvested in another Member State of the Community which at that time were in transit to the Federal Republic of Germany is in accordance with the purposes of the intervention system and does not, as was argued by the respondent in the national proceedings, constitute an infringement of the principle of protection of legitimate expectation of the individual, but a justified precaution against purely speculative activities. Besides, such an application does not withhold from the cereals in question the benefits of the intervention system, since an offer to intervention at the marketing centres of the Member State where the cereals were at the time remains perfectly possible, as was the case before they were consigned to the Federal Republic of Germany.

5. Accordingly, the answer must be that Decision 69/13/EEC of the Commission of 8 May 1969 authorizing the Federal Republic of Germany to limit its purchases of certain cereals also applies to cereals harvested in another Member State of the Community which either on 2 or 8 May were in transit to the Federal Republic of Germany and in respect of which an offer to intervention in proper form was not made until after that date.

Costs

6. The costs incurred by the Commission of the European Communities, which submitted its observations to the Court, are not recoverable, and as these proceedings are in, so far as the parties to the main action are concerned a step in the action pending before the national court, costs are a matter for that court.

On those grounds, THE COURT in answer to the questions referred to it by the Bundesgerichtshof by an order of that court dated 31 October 1974, hereby rules: