JUDGMENT OF 8. 4. 1976 - CASE 29/75 KAUFHOF v COMMISSION

In Case 29/75

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

gives the following

JUDGMENT

Facts

The facts and the arguments of the parties put forward during the written procedure may be summarized as follows:

I — Facts and written procedure

The applicant runs department stores in the Federal Republic of Germany where it offers for sale food specialities which it obtains partly by importing them itself.

On 2 January 1975, it applied to the Bundesamt für Ernährung und Forstwirtschaft (Federal Office for Food and Forestry) (hereinafter referred to as ‘the Bundesamt’) for the grant of an import licence for 5000 boxes of preserves of beans in pod coming under tariff heading 20.02 ex G from the People's Republic of China which were in free circulation in the Netherlands.

On 14 January 1975 the Federal Republic of Germany, relying on Article 115 of the EEC Treaty, requested authorization not to apply Community treatment to the abovementioned goods originating in the People's Republic of China and put into free circulation in the other Member States, in respect of which applications for import authorizations were made later than 1 January 1974 (?1975). It was claimed that three applications had been made to the Bundesamt (the first two dated 2 January 1974 (?1975) concerning sums of DM86982 and DM 39803 corresponding to products put into free circulation in the Netherlands, the third dated 7 January 1975 concerning a sum of DM 36349 corresponding to products put into free circulation in Belgium), that further applications were to be expected, that there was no agreement with China authorizing the importation of these goods, and that direct imports were not authorized, with the exception of quotas allowed in for trade fairs.

By a decision of 20 January 1975 (OJ L 23 of 30. 1. 1975, p. 19), the Commission authorized the exclusion of the said goods ‘in respect of which applications for import licences were lodged after 1 January 1975’.

Relying upon that authorization, the Bundesamt rejected the applicant's application for an import licence on the same day.

On 4 March 1975 the latter appealed to the Verwaltungsgericht Frankfurt against the decision of 18 February 1975 made by the Bundesamt rejecting the protest which the applicant had lodged on 5 January 1975.

It then commenced the present proceedings by an application of 13 March 1975 entered in the Court Registry on 17 March 1975.

The written procedure followed the normal course.

The Court, after hearing the report of the Judge-Rapporteur and the views of the Advocate-General decided to open the oral procedure without any preparatory inquiry.

II — Conclusions of the parties

The applicant claims that the Court should:

1) Annul the Decision of the Commission of 20 January 1975 (75/71/EEC);

2) Order the defendant to pay the costs.

The defendant contends that the Court should:

1) Dismiss the application as unfounded;

2) Order the applicant to pay the costs.

III — Submissions and arguments of the parties

A — Admissibility

According to the applicant no doubt is possible as to the admissibility of the application lodged in accordance with the second paragraph of Article 173 of the EEC Treaty, in view of the judgments of the Court of 1 July 1965 (Alfred Toepfer KG and Getreide-Import Gesellschaft v Commission of the EEC, Joined Cases 106 and 107/63 [1965] ECR 405) and 23 November 1971 (Werner A. Bock v Commission of the European Communities, Case 62/70, [1971] ECR 897). The contested decision concernes the applicant because it expressly extended the authorization to a date when the latter had applied for an import authorization.

That decision is of direct and individual concern to the applicant. In fact it appears from the facts that the authorization was requested precisely because of the applications for import licences pending at that time. When the decision of 20 January 1975 entered into force the applicant — possibly just like other importers — was distinguished individually in the same way as if it had been the addressee of the decision.

The Commission replies that an application lodged by an individual against a decision authorizing a Member State, in accordance with Article 115 EEC, not to apply Community treatment to goods is, in principle, inadmissible under the second paragraph of Article 173 of the Treaty.

A decision addressed to another person is neither of direct concern to a natural or legal person involved in an import transaction, since the Member State is merely authorized to adopt a measure within the scope of its discretionary powers, or of individual concern to that person since the protective measure is of concern to all those who wish to import during the period when it is applicable. Nevertheless there is no reason in the present case to put forward the objection of inadmissibility. After the judgment given by the Court in Case 62/70 (mentioned above) there is certainly no further doubt as to the admissibility of an application such as that in the present case, even having regard to the Commission Decision of 12 May 1971 empowering Member States to take interim protective measures with regard to the importation of certain products originating in third countries and put into free circulation in other Member States (JO L 121, p. 26 of 3. 6. 1971), amended by the Commission Decision of 9 March 1973 (OJ L 80 of 28. 3. 1973, p. 22).

B — The substance of the case

The applicant claims that the provisions of Article 115 of the EEC Treaty do not apply within a sphere in which there is already a common commercial policy, and in which it is impossible to envisage deflections of trade caused by certain measures of commercial policy of the Member States. It is true that the importation of products processed from fruit and vegetables from third countries is not yet governed by a Community regulation although the Member States are no longer authorized to retain measures of commercial policy which are incompatible with the EEC Treaty (Article 30 et seq.). In support of that argument it may be noted that the treatment of imports comes within the common agricultural policy as ‘common machinery for stabilizing imports or exports’ (Article 40 (3)) since the end of the transitional period at the latest (Article 8 (7)).

Furthermore in Article 7 of Regulation No 865/68 of 28 June 1968 on the common organization of the market in products processed from fruit and vegetables (OJ English Special Edition 1968 (I), p. 228), the Council undertook to standardize the treatment accorded to imports from third countries before 1 January 1969. These provisions should have been applied not later than 1 July 1969. It follows from this regulation that since 1 January 1970 national measures prohibiting the intra-Community movement of goods have no longer been permitted.

The provisions of Article 115 draw a distinction between two cases:

where the execution of national measures of commercial policy is obstructed by deflection of trade;

where differences between measures of national commercial policy lead to economic difficulties.

The contested decision refers only to the first case. The Federal Republic of Germany bases its decision rejecting the application and its decision on appeal essentially on the alleged difficulties for national production caused by the import of preserves of beans from the People's Republic of China. Nevertheless the total quantity of preserves of beans imported into the Federal Republic amounted in 1972 and 1973 to approximately 108000 metric tons, 96300 metric tons of which came from other Member States and only 7500 metric tons from third countries in 1972, whilst in 1973 102500 metric tons came from other Member States and only 5100 metric tons from third countries.

The facts enabling the Commission to adopt a decision in consideration of the first case mentioned in Article 115 are to be interpreted and applied strictly. In its judgment of 23 November 1971 (mentioned above), the Court partially annulled the decision of the Commission because the latter, having regard to the insignificance of the transactions (2·6 % of the total quantity of imports), had exceeded the limits of what was ‘necessary’. The disproportion is just as clear in the present case (approximately 0·8 % of all imports made in 1973; the applicant does not know the quantity permitted to be imported in 1974) which did not justify suspension of the principle of the free movement of goods. Further, the import of preserves of beans into the Federal Republic of Germany from the People's Republic of China does not affect measures of commercial policy adopted by the Federal Republic with regard to the People's Republic of China, far less obstruct them. Article 115 of the EEC Treaty must enable national commercial policy to be carried out but must not make available protection against deflections of trade. Such protection could only be obtained by means of this procedure if the Federal Republic was conducting a restrictive policy in respect of the product in question for reasons of commercial policy. An agreement on trade and financial transactions has existed between the two countries since 5 July 1973.

The application of the first paragraph of Article 115 is subject to the limits laid down in the third paragraph, according to which priority must be given to measures which cause the least disturbance to the functioning of the common market. The consequence of this as that there are limits to the power to grant the Member States an authorization having retroactive effect. In accordance with its powers in matters of commercial policy, the Commission must ensure that the autorization granted can be used only when the quantity imported is continually increasing whereas in the present case it has not proved that the quantities imported in 1975 are at a least equal to those imported in 1974.

The Commission also imposed restrictions from the procedural point of view in its decision of 12 May 1971, as amended by that of 9 March 1973, according to which an import authorization shall be issued not later than eight working days following submission of the application by the party concerned and the Member State concerned must take a decision whether or not to issue an authorization as soon as it receives notification of the decision of the Commission concerning the implementation of Article 115, and in any event not later than twelve working days following submission of the application. The Commission could therefore not extend its decision of 20 January 1975 to applications made after 2 January 1975.

Lastly, Article 190 EEC has been infringed. It is not enough for the Commission merely to reproduce the wording of that provision in the case of decisions taken on the basis of Article 115. Because of the special nature of Article 115, in the present case the measures of commercial policy adopted by the Federal Republic of Germany in respect of the People's Republic of China, the execution of which was obstructed by deflection of imports, should have been indicated.

The defendant replies that Article 115 is certainly based upon commercial policy, but that its field of application comes within the free movement of goods which is capable of being restricted, if necessary, by the Member States under an authorization from the Commission. It follows from the Treaty that there may be national measures requiring application of the first paragraph of Article 115 even after the end of the transitional period, as long as the ‘uniform principles’ within the meaning of Article 113 have not been achieved because the Community has still not completely exercised its jurisdiction in all sectors. It appears from the statement of the reasons on which the contested decision is based that the present case deals only with the first situation postulated by Article 115. In that case, a measure of commercial policy is not obstructed as soon as it is affected in one way or another but when it is no longer effective to the desired extent and is no longer or no longer entirely able to fulfil its function. According to the judgment in Case 62/70, it is the ‘significance’ of a deflection of trade in relation to the ‘effectiveness of the measure of commercial policy proposed by the Member State concerned’ which the Court regards as important when applying Article 115.

The measure applied in the present case in respect of the People's Republic of China by the Federal Republic of Germany is a national measure. It is a sector in respect of which there is not yet a common commercial policy (under Regulation No 865/68, mentioned above, in trade with third countries, only the sphere of duties and charges was standardized, but not that of quantitative restrictions; furthermore, since it was impossible to comply with the date mentioned in Article 7 because of the complexity of the matter, the national provisions remain in force). The jurisdiction of the Community is not sufficient by itself to achieve a common system with regard to commercial policy, but must nevertheless be exercised. In this respect such a system is not to be achieved automatically. The contents of this system must first of all be fixed by the Community institutions and as long as no Community measure has been adopted, the Member States must be empowered to retain national measures.

That is what the Court held in its judgment of 13 December 1973 (Sociaal Fonds voor de Diamantarbeiders v NV Indiamex and Association de fait De Belder, Joined Cases 37 and 38/73, [1973] ECR 1609) concerning national charges having an effect equivalent to customs duties. The same must apply to quantitative restrictions. As long as, in accordance with the Treaty, national measures of commercial policy may be applied in respect of third countries, Article 115 remains applicable.

The defendant based its decision solely on deflections of trade; in its application the Federal Republic of Germany also relied upon this aspect. The present proceedings are concerned exclusively with that decision and the statement of reasons on which it is based and not with the proving of economic difficulties by the Federal Republic or the decision of rejection by the Bundesamt.

In order to reply to the question whether the principle of proportionality was observed, it is necessary first of all to establish which measure of commercial policy was threatened by deflections of trade. The only import authorizations granted by the Federal Republic of Germany for products from the People's Republic of China concerned quotas intended for trade fairs. The fact that a State in general conducts an active commercial policy does not in any way imply that it cannot consider taking special restrictive measures or that these measures cannot be measures of commercial policy. The statement made by the applicant that in the summer of 1974 the Federal Republic of Germany authorized indirect imports of the goods in question cannot assist in settling the present proceedings. The fact that at a previous time the execution of a commercial policy may have been less strictly protected against deflections of trade is not decisive for the evaluation of the situation existing when the contested decision was taken, that is to say, at the beginning of 1975.

In the present case there can remain no doubt as to the existence of a deflection of trade. In the Benelux Countries (as in France, Ireland and Italy), the import of the goods in question from the People's Republic of China is unrestricted. At the beginning of January 1975, there was in addition to the application of the applicant concerning DM 86982, an application on the same day concerning DM 39803 and an application dated 7 January 1975 concerning a sum of DM 36349, and other applications must be expected.

The import prohibition applied by the Federal Republic of Germany to the People's Republic of China concerning the goods in question would have been rendered meaningless by the mere fact that the three indirect imports requested were carried out and it would have been made completely ineffective.

Since it is necessary to evaluate the effect of indirect patterns of trade on the effectiveness of an import prohibition, the only valid comparison must be made with the total imports into the Federal Republic of the product concerned from the third country in question. Compared to these imports, which amounted to DM 184000 for the first eleven months of 1974, the figure of DM 163134, which is equivalent to all three applications for import licences, represents a quantity which is undoubtedly threatening (even by making a comparison with imports from other third countries — DM 3488000 for the same period — it is impossible to find a lack of proportion).

For Article 115 to be able to fulfil its function as a safeguard clause with the necessary effectiveness, it must in principle also be capable of application to transactions already begun. This follows from the procedure for applying the safeguard clause as laid down in the decision of 12 March 1971, Article 1 of which authorizes the Member States to make the import of the products in question in free circulation in other Member States subject to the issue of a licence; the latter need not be granted automatically or immediately, since the Member State may commence the procedure under Article 115 within the period prescribed for consideration of the application. As long as this period has not expired, every application for a licence is subject to the condition that Community treatment may not be applied to the goods in question.

The free movement of goods is thus already restricted to the necessary extent. The authorization to apply protective measures to applications already made within the prescribed period cannot therefore be regarded as an extension of the safeguard measure to applications which, within the meaning of the judgment in Case 62/70, have been ‘submitted at a time when the principle of the free circulation of goods applied unrestrictedly to the goods in question’. It is for the Member State to decide to what extent it uses the authorization of the Commission not to apply Community treatment to goods by applying individual measures to each applicant.

Furthermore, the defendant would have acted in contradiction to the principle that until the standardization of the regulations on imports it was necessary to ensure the execution of national measures of commercial policy if, by determining to that effect the period of application of its decisions, it had obliged the Federal Republic to import each year ‘a regularly increasing quantity’ or even merely ‘a constant quantity’.

The calculation of the periods laid down in the decision of 12 May 1971 is based on Regulation No 1182/71 of the Council of 3 June 1971 determining the rules applicable to periods, dates and time-limits, according to which ‘working days’ means all days other than public holidays, Sundays and Saturdays and since a period expressed in days is to be calculated from the moment at which an action takes place, the day during which that action takes place shall not be considered as falling within the period in question. The terminological distinction drawn in the German version between the word ‘Arbeitstag’ used in the regulation and the word ‘Werktag’ used in the decision is of no significance, as the French text the uses in both cases the expression ‘jour ouvrable’ and the English text the expression ‘working day’. In applying these provisions to the present case it follows therefrom that the prescribed period was adhered to.

Lastly, in order to know whether the contested decision contains a sufficient statement of the reasons upon which it is based, consideration should be given to its legal character, that is, the context within which it was adopted, and account should be taken of the participation of the addressee in its formulation. The Federal Republic, which set the procedure in motion, participated in the formulation thereof, so that it received all the legal guarantees provided for in Article 190. The defendant was therefore able merely to mention briefly the essential factors upon which the authorization decision was based.

The applicant in its reply claims first of all that after lodging its application it obtained authorization to import the consignment in question, that the Federal Republic of Germany granted a direct quota of preserves of beans for the People's Republic of China and that a new import application dated 1 April 1975 was rejected by the Bundesamt in view of a further authorization granted to the Federal Republic on 17 April 1975 under Article 115.

The decisive question is whether since 1 January 1975, after the end of the transitional period and in accordance with the general use which the Community institutions make of their powers in commercial matters, the Commission has still the right, in the completely integrated sphere of the agricultural policy of the EEC, to restrict the intra-Community movement of goods by granting authorizations under Article 115.

In view of Article 10 (1) of Regulation No 865/68, which prohibits quantitative restrictions in intra-Community trade, products processed from fruit and vegetables originating in a third country which are in free circulation in a Member State can no longer be excluded from Community treatment under Article 115. As regards the intra-Community movement of goods,. the central problem in the present case (which the defendant did not realize when it referred to the judgment in the Diamantarbeiders Case, mentioned above), the common commercial policy must therefore be implemented automatically (Judgment of the Court of 10 December 1974, Mr Charmasson v Minister for Economic Affairs and Finance (Paris),Case 48/74, [1974] ECR 1383).

With regard to the application of Article 115, it is not sufficient for the applicant Member State to rely on the fact that commercial policy is being restricted. After the transfer to the Community of powers in that respect, it must give reasons for retaining its measure. This is all the more necessary in the present case since the Federal Republic subsequently granted a quota for direct imports of an amount far exceeding the value of the applications made at the beginning of January 1975. As for the Commission, under Article 38 et seq. and Article 110 of the EEC Treaty it must also conduct an active commercial policy when it grants authorizations under Article 115: it should have taken account in the present case of the fact that the other Member States have liberalized the importation of the products in question and ensured that differences in policy between the Member States steadily diminish.

In order to know whether the authorization given to the German Government was ‘necessary’, the amount of the applications at the beginning of January 1975 (approximately DM 163000) should be compared with the total imports during the year 1974 (approximately DM 63000000 from January to November 1974) and with the new quota (approximately DM 440000) granted by the Federal Republic in March 1973 (?1975) for preserves of beans from the People's Republic of China.

As regards the ‘retroactive effect’ of the decision, the opinion of the defendant is incompatible with the judgment given in Case 62/70, which emphasizes the question whether, at the time when the application was made, the principle of free movement of goods was valid without restriction. To maintain that the decision of 12 May 1971 has itself alone restricted the free movement of goods to the necessary extent is incompatible with Articles 9 and 30 of the EEC Treaty, and with the said judgment. Moreover, Article 115 does not permit the adoption of preventive measures and the validity of the decision of the Commission of 12 May 1971 must be questioned.

The measures of commercial policy which were hindered by deflection of imports, the reason why the authorization was extended to import applications which had already been made and the reason — in comparison with previous years — why Community treatment was generally not applied to the goods in question should have appeared from the statement of reasons.

In its rejoinder, the Commission replies first of all that as regards the sequence of events after the application to the Court had been lodged, the application for an import licence made on 1 April 1975 was made after the contested decision had ceased to be valid, and that the validity of the decision of the Commission of 17 April 1975, on the basis of which the Bundesamt rejected the said application, is not in question in the present case.

The partial introduction of a common commercial policy for certain goods (for example the introduction of safeguard measures) does not in the least imply the standardization of systems of trade and does not preclude the existence of a certain number of lacunae with regard to which national measures may continue to exist in conformity with the Treaty.

The application of Article 115 depends on the commercial situation. As long as commercial policy is not wholly governed by uniform principles, it is possible to apply that article, which authorizes exceptions not only to the provisions of the Treaty, but also to secondary Community law. Since the Member States still apply various quantitative restrictions to third countries with regard to certain goods, the Community exercices its jurisdiction in a manner which is certainly general but not absolute.

The reference to the judgment in Case 48/74 is irrelevant, as Article 115 can constitute an exception to the principle of free movement of goods and is stated expressly in the Treaty to be applicable beyond the transitional period and also to be applicable unconditionally to agricultural products in accordance with Article 38 (2) of the Treaty.

The commercial situation of the Federal Republic of Germany with regard to the products in question is in no way characterized only by the absence of commercial provisions of a contractual nature but essentially by a fundamental prohibition on importation which is lifted from time to time by authorizations under a discretionary power. As long as a Member State is authorized to retain a national quantitative restriction, it is in no way required — within the framework of Article 115 — to explain ‘the grounds on which it retains the commercial measure in question’ and why it does so in that particular form. Commercial measures adopted by Member States are, however, subject in certain circumstances to consultation within the meaning of the decision of the Council of 19 December 1972, laying down certain transitional measures for the progressive standardization of import systems with regard to third countries (OJ English Special Edition 1972 (30-31 December), p. 101).

The defendant must not at the time when the safeguard clause is applied ‘conduct an active commercial policy’ which would be contrary to the safeguard function of Article 115.

Furthermore, in order to know whether a measure of commercial policy is hindered, it is necessary to consider the actual measure, and any comparison with other goods, countries or periods is in principle prohibited. Article 115 is intended to protect a current measure of commercial policy. It cannot be inferred from the prohibition on imposing charges having an effect equivalent to customs duties (Judgment in Joined Cases 37 and 38/73) that there is an analagous prohibition on quantitative restrictions, which have quite different effects on external trade.

The abovementioned decision of 19 December 1972 is based on the principle that the Member States may independently amend their import terms.

There has not been any ‘increase in severity’ since the end of March 1975 a large quantity was again the subject of an import authorization.

As regards the ‘retroactivity’ of the contested decision, an import prohibition must, in order to have the required effectiveness, be capable of applying to all imports, direct or indirect, and of covering applications lodged

immediately before the decision is adopted, the lodging of which renders specific the danger of a deflection of trade.

The defendant referred to the decision of 12 May 1971 in order to show that all importers who are required in accordance with that decision to produce a licence, must envisage that their applications may be rejected. Since that decision is of fundamental importance and forms, to a certain extent, part of the background to the contested decision, it should be stated that it is in no way a means of reviving the second paragraph of Article 115 which authorizes the Member States, in cases of urgency, to take all necessary safeguard measures, but is an authorization based on the first paragraph of the said article permitting the Member States to introduce into intra-Community trade specific measures of control with regard to specific products from specific countries. In order to achieve the objective pursued by Article 115, it must be possible to adopt the safeguard measure before the deflections of trade have occurred; for this purpose it is essential to observe indirect patterns of trade.

The duty to obtain an import licence and short periods enabling an examination to be carried out by the Member States and the Commission are such as to cause the least disturbance to the functioning of the common market. Furthermore the result of the fact that the application may be considered by the competent authorities of the Member State is that the latter is not tempted automatically to initiate the procedure under Article 115.

The decision of 12 May 1971 the objective of which was to create the provision of Community law necessary to restrict the free movement of goods to the extent necessary but no further, is one of the ‘exceptions for which provision is made by Community law itself’ as stated in the judgment of 15 December 1971 (International Fruit Company NV and others v Produktschap voor Groenten en Fruit, Joined Cases 51 to 54/71, [1971] ECR 1107).

The applicant tries to interpret the requirement to state the reasons upon which an authorization decision addressed to a Member State is based in such a way that the statement of reasons must not only enable its legality to be reviewed by the addressee and, if necessary, by the Court, but must also take account of all persons who are not addressees but to whom it may be of direct and individual concern within the meaning of Article 173 of the Treaty. But a particularly detailed statement of reasons in an emergency procedure for the sake of persons who are not addressees of the decision appears inappropriate and cannot therefore be mandatory. The system of trade in question is known by all the importers concerned. One of the reasons upon which a temporary total prohibition on importation is based is, by definition, that it is necessary also to protect imports for which applications have already been made. Lastly, there is no need to explain why the exclusion was used in a manner different from that of previous years, since the safeguard measure is determined in each case by the manner in which imports are treated with regard to the country of origin during the period in question.

On 1 October 1975, the applicant requested the Court to declare that the case had been settled then, on 10 December 1975, in reply to a request for explanations by the Court, it asked the Court to fix a date for the oral proceedings.

The applicant, represented by Mr Ehle, Advocate at the Cologne Bar, and the Commission of the European Communities represented by Mr Albrecht, its Legal Adviser, acting as Agent, presented oral argument at the hearing on 17 February 1976.

The Advocate-General delivered his opinion at the hearing on 9 March 1976.

Law

1. By an application lodged at the Court Registry on 17 March 1975, the proceedings relating to which were stayed temporarily at the request of the parties, the applicant sought the annulment of the decision of the Commission of 20 January 1975(75/71/EEC) authorizing the Federal Republic of Germany not to apply Community treatment to preparations and preserves of beans in pod coming under subheading 20.02 ex G of the Common Customs Tariff, originating in the People's Republic of China and put into free circulation in the other Member States, in respect of which applications for import authorizations were made after 1 January 1975.

2. On 2 January 1975 the applicant made a request to the Bundesamt für Ernährung und Forstwirtschaft (Federal Office for Food and Forestry) for an import authorization in respect of 5000 boxes of the said preserves, which had been put into free circulation in the Netherlands. The Government of the Federal Republic of Germany, which had received two other applications for import authorizations, one of 2 January 1975, concerning DM 39803 of preserves in free circulation in the Netherlands, and the other of 7 January 1975 concerning DM 36349 of preserves in free circulation in Belgium, relied on Article 115 of the Treaty in asking the defendant by a telex message of 14 January 1975 to authorize it ‘not to apply Community treatment to preparations and preserves of beans in pod coming under subheading 20.02 ex G ii of the Common Customs Tariff, No 2002-65 of the Nomenclature of Goods for External Trade Statistics, NIMEXE No 2002-95, originating in the People's Republic of China and put into free circulation in the other Member States, in so far as the applications are later than 1 January 1974 (sic)’. The Federal Republic of Germany gave reasons for its request, pointing out that these three applications had already been made to the Bundesamt and that further import applications were to be expected.

3. On the basis of that request, the defendant, by a decision of 20 January 1975, authorized the Federal Republic of Germany not to apply Community treatment to the products in question. Relying upon that authorization, the Bundesamt rejected the applicant's application for an import licence on the same day.

4. The latter complains that the defendant has exceeded its powers under Article 115 of the EEC Treaty and thus violated the principle of the proportionality of administrative measures. In view of the insignificance of the quantities of preserved beans in pod which the applicant applied to import, it was not, according to the applicant, necessary to extend the authorization in question to licence applications pending when the matter was referred to the Commission.

5. As from 1 July 1968, the date of the entry into force of Regulation (EEC) No 865/68 of the Council (OJ English Special Edition 1968 (I), p. 225), any quantitative restriction or measure having equivalent effect relating to the products in question is prohibited in the internal trade of the Community. Under the first paragraph of Article 115 of the Treaty: ‘In order to ensure that the execution of measures of commercial policy taken … by any Member State is not obstructed by deflection of trade, or where differences between such measures lead to economic difficulties in one or more of the Member States’, the Commission may, inter alia,‘authorize Member States to take the necessary protective measures, the conditions and details of which it shall determine’, it being nevertheless understood that under the third paragraph of the same article: ‘In the selection of such measures, priority shall be given to those which cause the least disturbance to the functioning of the common market’. Such authorization may in particular constitute an exception to the provisions of Article 9 of the Treaty in conjunction with those of Article 30, as a result of which the prohibition on quantitative restrictions on imports and all measures having equivalent effect applies not only to goods originating in Member States but also to goods in free circulation in Member States which originated in third countries. Because they constitute not only an exception to the beforementioned provisions, which are fundamental to the operation of the common market, but also an obstacle to the implementation of the common commercial policy provided for by Article 113, the derogations allowed under Article 115 must be strictly interpreted and applied.

6. It appears from the statements made by the defendant's Agent during the oral proceedings that it considers that the authorization requested should be granted if the measure of commercial policy adopted by the Member State concerned is compatible with the Treaty, without having to take account of the reasons on which that measure is based, and, when it involves an absolute prohibition on imports, without having to take account of the quantity, whether large or negligible, concerned in the applications already received. By failing to review the reasons put forward by the Member State concerned in order to justify the measures of commercial policy which it wishes to introduce, the Commission was in breach of its duty under Article 115 to examine whether the measures have been ‘taken in accordance with this Treaty’ and whether the protective measures sought are necessary, within the meaning of the same provision. By extending the authorization to applications already received, without taking account of the size or insignificance of the quantity in question in these applications, the Commission has also exceeded the limits of its discretion. Consequently, the contested decision must be annulled without its being necessary to consider the other submissions put forward in the application.

Costs

7. Under Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs if they have been asked for. In the present case the defendant has failed in its submissions. Therefore, in accordance with the conclusions of the applicant, the defendant must be ordered to pay the costs.

On those grounds, THE COURT hereby rules:

1 The decision of the Commission of 20 January 1975 authorizing the Federal Republic of Germany not to apply Community treatment to certain products originating in the People's Republic of China and put into free circulation in the Netherlands, is annulled to the extent to which it concerns products in respect of which applications for licences were pending before the German administration when the application for authorization was lodged.

2 The defendant is ordered to bear the costs.