Judgment of the Court 21 January 1976
In Case 40/75
THE COURT composed of: R. Lecourt, President, R. Monaco and H. Kutscher, Presidents of Chambers, A. M. Donner, J. Mertens de Wilmars, P. Pescatore, Lord Mackenzie Stuart and A. O'Keeffe, Judges, Advocate-General: G. Reischl Registrar: A. Van Houtte
gives the following
JUDGMENT
Facts
The facts, and the arguments of the parties set out in the course of the written procedure, may be summarized as follows:
I — Facts and procedure
In the context of its counter-inflation policy the Italian Government decided, by Decree-law No 427 of 24 July 1973, which became Law No 496 of 4 August 1973 (Gazzetta Ufficiale No 189 of 24 July 1973 and No 216 of 22 August 1973), to freeze the prices of a certain number of widely-consumed foodstuffs, in particular, the prices of dry pasta products (which, under the Italian rules must contain only durum wheat). The Azienda di Stato per gli Interventi nel Mercato Agricolo (the National Body for Intervention on the Agricultural Market, hereinafter referred to as ‘the AIMA’) was enabled — by a ministerial order — to ‘stabilize’ the wheat market by buying and stocking (in the Community and in third countries) and by re-selling on the domestic market on conditions determined by the Comitato Interministeriale per la Programmazione Economica (the Inter-Ministry Committee for Economic Planning, hereinafter referred to as ‘the CIPE’). After September 1973 the AIMA thus acquired 10500000 quintals of wheat, principally on the world market, at an average price of $ 290 that is to say, Lit. 18500 per quintal.
From September 1973 to April 1975 the AIMA sold to Italian manufacturers of semolina and of pasta made with durum wheat 8500000 quintals at prices which from December 1973 were almost 30 % lower than the quotations on the Italian market (at Lit. 13000 to 13600 instead of an average of Lit. 18500 with peaks of Lit. 20000).
The aid thus granted for 1974 may be assessed at Lit. 27000000000 which, taking account of the annual consumption of pasta made from durum wheat in Italy (15000000 quintals), corresponds to a subsidy amounting to 6 % of the price free-factory.
On 14 September 1973 the French association of manufacturers of pasta products drew the attention of the appropriate Directorates-General of the Commission to the situation brought about by the Italian aid which, according to the association, enabled Italian manufacturers to sell pasta products in France at lower prices than the French cost prices. Thus in January 1974 Italian pasta products in packets of 500 g were put on sale on the French market at prices varying between FF 2·385 and 2·505 per kg for quantities of 5 metric tons whilst the selling prices of French manufacturers, which only included a very small profit margin, were between FF 3·08 and 3·20 per kg at the same period.
The Director of the Directorate-General for Industrial, Technological and Scientific Affairs of the Commission intimated on 31 October 1971 that the appropiate departments ‘were in the process of considering the file’, and on 5 November 1973 that he initiate unable to state ‘the measures which the Commission might adopt’.
At the same time the Association requested the French Minister for Agriculture and the Office National Interprofessionnel des Céréales (the National Cereals Trade Board) to intervene with the Community authorities.
Since the Italian Government did not consider that the measures adopted by it constituted an aid within the meaning of Article 92 (1) of the Treaty it had not officially informed the Commission of them in pursuance of Article 93 (3). In the course of examinations carried out by its appropriate departments the Commission considered these measures a number of times: first on receiving a delegation of semolina manufacturers on 15 March 1974, secondly in the course of meetings of the Management Committee for Cereals and of the working party on competition in agriculture and thirdly by discussions between officials of the Commission and of the Italian Government and by the request made to the latter on 24 December 1974 to supply a statement of the buying and selling prices adopted by the AIMA and a statement of the Italian exports of pasta products to other Member States.
The Italian Government put forward arguments and facts designed to show that neither could competition have been distorted nor could trade between Member States have been affected by those measures; they may be summarized as follows.
Confronted with a considerable increase in the prices of durum wheat on the Italian market and the world market, and taking account of the maximum price, the so-called ‘administrative price’ prescribed by the Decree-law in July 1973, the AIMA merely ensured that durum wheat was made available to the Italian manufacturers at the average price, the ‘reference price’ calculated by the CIPE. Thus, taking account of the selling prices, the tonnages of durum wheat sold to each manufacturer made good the loss actually incurred owing to his sales of pasta products on the domestic market.
A whole series of checks was carried out in order to ensure that the aid granted by the AIMA benefited only pasta products made from durum wheat and only for the quantities of those products consumed on the Italian domestic market.
The applicant initiated these proceedings by an application of 17 April 1975 which was recorded in the Court Registry on 22 April 1975.
The written procedure followed its normal course.
Upon hearing the report of the Judge-Rapporteur and the views of the Advocate-General, the Court decided to open the oral procedure without a preparatory inquiry.
II — Conclusions of the parties
The applicant claims that the Court should:
1) declare the application admissible and well-founded;
2) order the European Economic Community, in the person of the Commission, to pay to it the sum of FF 250000 in compensation for the damage suffered by it by reason of the wrongful act or omission of the Commission in failing to initiate the procedure laid down by Article 93 (2) of the EEC Treaty, and in tailing to use the powers conferred upon the Commission by Articles 93 (2) 155 and 169 of the said Treaty to ensure that the Italian State abolished the aid granted by it to Italian manufacturers of semolina and pasta products, thereby infringing Article 92 of the EEC Treaty;
3) alternatively, order the Community, in the person of the Commission, to pay to it the sum of FF 1 as provisional damages and appoint such expert as the Court may think fit with the task of establishing the amount of the damage suffered by the applicant;
4) order the applicant to bear the entire costs.
The defendant contends that the Court should:
1) dismiss the application as unfounded;
2) order the applicant to bear the costs.
III — Submissions and arguments of the parties
A — Appraisal of the facts
The applicant refers to 1453011 quintals re-sold in February and March 1974 at the basic price of Lit. 13000, which was below the world rate, whilst the defendant refers to 2543876 quintals which were re-sold in April, June and September at an unaltered price although the world market had fallen. With regard to the quantity of 66594 quintals of Italian pasta products imported into France at the end of March 1974, in comparison with 56814 quintals at the end of March 1973, the defendant puts forward the French customs figures for the whole of the year 1973, that is, 22200 metric tons and for the whole of the year 1974, that is, 22900 metric tons.
The applicant states that although the Commission was initially alerted in September 1973 by the French trade association it waited until December 1974 before requesting information from the Italian Government; against this the defendant refers to the frequent contacts carried out within Community authorities and the fact that a certain period of observation was necessary before finding an overall loss to the AIMA on the quantities bought by it, to be charged to ‘State resources’ and which would provide grounds for concluding that there was an aid within the meaning of Article 92.
B — The admissibility of the application
The applicant considers that, having regard to the case-law of the Court, in particular to the judgment of 28 April 1971(Lütticke v Commission, Case 4/69, [1971] ECR), an action for damages initiated under Article 178 and the second paragraph of Article 215 of the Treaty may be founded on the failure of the Commission to comply with Articles 93 (2), 155 and 169 of the Treaty.
Whilst the defendant is content to leave the question of admissibility to the Court, it wonders whether the admissibility of such an application may perhaps be doubtful since it does not appear, in the words of the said judgment, that it ‘contains all the details necessary to establish with certainty the subject-matter of the dispute and the legal scope of the grounds invoked in support of the submissions’. It is impossible to determine how the aid complained of caused the applicant to suffer a loss of earnings or profit. Although it is unnecessary to consider whether an individual may institute proceedings against the Commission for damages on the ground of its failure to use the powers conferred upon it by Article 169 it is quite unnecessary for the applicant to invoke this article in the context of the present application: the question of its applying that Article only arises if the Member State in question has failed to comply with a decision of the Commission adopted under Article 93 (2); this could not possibly happen since such a decision has not been adopted and if, moreover, such a decision had been taken it would have given concrete form to the provisions of Article 92 (1) which would have had an effect in the legal system of the Member States so that they could be invoked before the national courts, in accordance with the judgment of 19 June 1973(Capolongo, Case 77/72, [1973] ECR 611).
In the present case an application under Article 215 thus remains the means whereby individuals may obtain protection against an infringement of Articles 92 and 93 which causes them to suffer damage without there being any need to invoke Article 169.
C — On the first submission
The applicant claims that the aid comes under Article 92 in that it distorted competition within the common market to the detriment of manufacturers of pasta products in other Member States. Furthermore the Commission has rendered itself liable through its failure to initiate the procedure laid down by the first and second subparagraphs of Article 93 (2), which would have prevented competition from being so distorted.
The defendant replies that although the re-sales complained of were indeed of such a nature as to ‘favour certain undertakings or the production of certain goods’ through ‘State resources’ according to the wording of Article 92 (1), they did not affect trade between Member States and were consequently compatible with the Common Market in terms of the said Article 92 (cf. the first subparagraph of Article 93 (2)). The AIMA only supplied durum wheat at reduced prices to Italian manufacturers of pasta and semolina produced from durum wheat and distributed on the domestic market in order to compensate them for their loss recorded on that market as a result of the freezing of prices. On the other hand exporters of pasta products did not obtain any special advantage. On the contrary they obtained the basic material at the prices prevailing on the domestic market.
The operations of the AIMA did not affect imports into Italy from Member States of pasta produced from durum wheat without egg since such imports were always virtually non-existent: 79 metric tons in 1972, 147 metric tons in 1973 and 189 metric tons in 1974 as opposed to the Italian production of 1500000 metric tons per annum. Italian law prohibits the sale of pasta products containing common wheat on the domestic market. Pasta products manufactured in other Member States very often contain varying amounts of common wheat. From the foregoing alone it may be concluded that the sales of durum wheat at reduced prices effected by the AIMA in favour of Italian manufacturers of pasta products intended for domestic consumption did not affect the conditions of competition and trade within the common market.
As regards quantities Italian exports registered a slight fall (- 4·6 %) in 1973 in comparison with 1972 and an increase of 6·2 % in 1974 with trends varying according to the Member States (+ 4·4 % in the case of France). This slight increase is to be explained by the imposition of Community levies in order to discourage exports to third countries as a result of the shortage of durum wheat on the world market and by the weak position of the lira. Italian export prices increased, as compared to 1972, by 25 % in 1973 and 75 % in 1974, which was comparable with the average increases in the price of durum wheat in Italy.
It is clear from the general scheme of Articles 92 and 93 that such an aid may only be granted or continued if the Commission considers that it is compatible with Article 92. Even if the Commission were to fail in its duty under which it is ‘bound to ensure respect for the provisions of Article 93’, as is stated in the judgment in Costa v Enel, individuals may not compel it to initiate the said procedure, The latter are protected neither by Article 177 nor, no doubt, by Articles 173 or 175. The application under the second paragraph of Article 215 is thus the only means, of redress. In the present case, however, for the reasons set out above, the defendant found that the aid complained of was not incompatible with Article 92.
The Commission has not been guilty of any wrongful act or omission arising from negligence in the application of Articles 92 and 93. Although the matter was never brought before the Commission pursuant to Article 93 (3) it availed itself of all possible means in order to acquaint itself with the relevant measure and its compatibility with Article 92. This comes within the sphere of economic administration in which the institutions may claim ‘to be entitled to a reasonable margin of error’ since they have employed all the means at their disposal in order to form their judgment. Furthermore the Community has not incurred any liability to the applicant because, even if it were to be considered that it made a wrong appraisal of the effect of the aid complained of on competition and trade, the interests of the French undertakings which the applicant represents have not suffered any actual damage as a result of the Italian measure which the Commission accepted.
The applicant replies that the Commission is begging the question in stating that the sales made by the AIMA at a loss in no way benefited Italian exporters. Proof of this is that according to the circulars of the undertaking J. Delaval, the agent for France of the Italian pasta factory Colavita, Italian manufacturers have put on the French market pasta products in packets of 500 g, in lorry-loads of 5 metric tons, at prices varying from FF 2·385 to 2·505 per kg whilst the French prices, which only include a very small profit margin, were between FF 3·08 and 3·20 at the same time.
The Commission rejoins that the applicant failed to make any serious attempt to put forward facts and figures contradicting those it had itself submitted. It asks how the difference mentioned in the Delaval circular could be imputed to the aid complained of since it was in fact in the first quarter of 1974 that this difference was reduced in favour of the French pasta products, in relation to the previous quarter, and indeed in relation to the first three quarters of 1973. The increase in the price of exported Italian pasta products was even greater for the years 1973 to 1974 as a whole than the increase in price of French pasta products: a price index of 174 for the former and 160·8 for the others. During the three quarters after the AIMA commenced its operations, the price index for exported Italian pasta products progressed from 135·3 to 168 whilst that of the French products remained at 139·6.
D — The second submission
The applicant maintains that it has been unfairly deprived of part of its sales by competing Italian manufacturers in 1974 to the extent of at least 670 metric tons in the south-east of France and in contracts for. supplying the provisioning service of the armed forces, and that it had been obliged to make exceptional reductions in its profit margins, already extremely low, in order to avoid a disastrous fall in its turnover.
The defendant replies that those allegations do not indicate any specific damage which occurred and still subsists. It is by no means impossible that the facts relied on are due to the greater competitiveness of the Italian products or to the ‘know-how’ of the manufacturers and their commercial dynamism. It is further necessary to compare the situation which has been described in respect of the period during which the aid was granted with the situation in previous years.
The figures show a continuing fall in domestic consumption in France since 1970, despite the general increase in the standard of living and in the consumption of foodstuffs, accompanied by a continuing fall in domestic production since that year. The progressive increase in imports was also ascertained well before the period during which the aid complained of was granted and the increase from 1972 to 1974 was only 4·4 %. It was even found that there was a fall in imports for 1973. After the aid was adopted prices of such pasta products increased more than the prices of French pasta products.
It is impossible to discern the damage, which the applicant alleged in very vague terms, in the sense of damage to the applicant itself, and the figures obtained as a result of observing the French market give grounds for considering that the Italian aid has had singularly little effect. The expert's report to which the applicant is willing to consent bears solely on the assessment of the precise amount of the losses which it has suffered. It is still necessary to prove the existence of the alleged damage.
E — The third submission
The applicant maintains that there is a relationship of cause and effect between the failure of the Commission to initiate the procedure laid down by Article 93 (2) and the damage occasioned to the applicant by the continuance of aids which were incompatible with the common market.
The defendant denies that it has been proved that this exceptional competition was in fact the consequence of the aid in question. If such had been the case it could only have followed from fraud which could not have been caused by the conduct of the Commission. The defendant is not in possession of the necessary means to inquire into the existence of such frauds the investigation of which is a matter for the Italian State and falls within its sphere of responsibility. Even if the defendant had initiated suitable procedures to bring about the abolition of the aid, on the view that the said aid ought to have been condemned, they could only have been opened and concluded after a certain period of time during which any damage arising would not have been attributable to the conduct of the Commission but to that of the Italian State.
The applicant, represented by Mr Brisac, of the Cour de Paris, and the Commission of the European Communities, represented by its Legal Adviser, Mr Van Ackere, acting as Agent, presented oral argument at the hearing on 18 November 1975.
The Advocate-General delivered his opinion at the hearing on 9 December 1975.
Law
1. By an application lodged on 17 April 1975 the applicant claims compensation for the damage suffered by it by reason of a wrongful act or omission on the part of the Commission in failing to initiate the procedure laid down by Article 93 (2) of the EEC Treaty, and in failing to use the powers conferred upon it by Articles 93 (2), 155 and 169 of the said Treaty to ensure that the Italian State abolished the aid granted by it in contravention of Article 92 of the Treaty, to Italian manufacturers of semolina and pasta products.
2. This aid was granted by the Italian Government within the framework of its counter-inflation policy to freeze the prices of a certain number of widely-consumed foodstuffs, in particular, the prices of dry pasta products (Decree-law No 427 of 24 July 1973 which became Law No 496 of 4 August 1973 [Gazzetta Ufficiale No 189 of 24 July 1973 and No 216 of 22 August 1973]).
3. The Azienda di Stato per gli Interventi nel Mercato Agricolo (the AIMA) which was charged with stabilizing the wheat market by buying and stocking as well as re-selling on the domestic market, sold to Italian manufacturers of semolina and of pasta made with durum wheat 8500000 quintals of wheat at prices which were on average 30 % lower than the quotations on the domestic market.
4. Since it alleged that it had suffered damage through the aid in dispute, the applicant claims the payment of FF 250000 as compensation or alternatively that the defendant should be ordered to pay to it the sum of FF 1 as provisional damages and that an expert should be appointed in order to establish the amount of the damage.
5. Amongst other submissions the defendant pleads the absence of a causal connexion between the behaviour complained of and the alleged damage.
6. The applicant maintains that it has been unjustly deprived of part of its sales on the French market by Italian manufacturers and that it has been obliged to make exceptional reductions in its profit margins which were already extremely low in order to avoid a disastrous fall in its turnover.
7. For example, in January 1974 according to the applicant, Italian pasta products were offered for sale on the French market at prices varying from FF 2·385 to 2·505 per kg whilst the selling prices of French manufacturers at the same period were from FF 3·08 to 3·20 per kg although these latter prices included only a very slight profit margin.
8. The defendant states that it was assured by the Italian Government that the AIMA only sold durum wheat at reduced prices to manufacturers who distribute their pasta products on the domestic market whilst exporters only obtained the raw material at the market price.
9. Although the applicant claims that its sales dropped in the south-east of France it has not established that this fall was caused by the Italian measures which it disputes.
10. It is clear from statistics that the export of Italian pasta products to France had already registered an increase in 1971, that is to say, before the aid complained of was granted.
11. Subsequently, during the period when this aid was in operation, as slight increase in exports to France (4·4 % in 1974 as compared with 1972) coincided with the imposition of Community levies on exports to third countries following the shortage of durum wheat on the world market and the weakness of the lira.
12. The difference between the prices free-factory of French pasta products and the free-at-frontier prices of Italian pasta products was indeed diminished in the first quarter of 1974 (FF 0·063 per kg) in relation to the previous quarter (FF 1 per kg) and indeed in relation to the three previous quarters for 1973 (on average FF 0·65 per kg).
13. Additional evidence that the applicant's argument is erroneous may be deduced from the fact that the prices of Italian exports increased in relation to 1972 by 25 % in 1973 and by 75 % in 1974, that is to say, in proportion to the average increase in the price of durum wheat in Italy.
14. The applicant does not examine these figures and merely states that the prices of Italian pasta products exported to France were lower than those of French pasta products and that in 1974 it lost sales to the extent of 670 metric tons in the south-east of France and in contracts for supplying the provisioning service of the armed forces, but without establishing a causal connexion between the aid granted in Italy and those circumstances.
15. Consequently the application must be dismissed.
Costs
16. Under Articles 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs.
17. The applicant has failed in its submissions.
On those grounds, THE COURT hereby:
1 Dismisses the application;
2 Orders the applicant to bear the costs.
1 Language of the Case: French