JUDGMENT OF 27. 1. 1976 — CASE 46/75 IBC v COMMISSION

In Case 46/75

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

gives the following

JUDGMENT

Facts

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

I — Facts and procedure

(a) Subject-matter of the action

On 3 March 1973 the applicant imported from Hungary 27 head of live cattle covered by tariff heading 01.02-A II b of the Common Customs Tariff, representing a total value of Lit. 11292260 and a weight of 17085 kg. At the customs office at Trieste the applicant was required to pay Lit. 198620 by way of equalization between the import charge and the compensatory amounts.

On 27 April 1973 the applicant imported from Yugoslavia a consignment of hindquarters of beef and veal covered by tariff heading 02.01-A II a 1 bb 33 of the Common Customs Tariff, representing a total value of Lit. 14619000 and a weight of 10368 kg. The sum paid by the applicant to the customs by way of equalization was Lit. 276870.

On 10 August 1973 the applicant imported from Hungary 22 head of live cattle covered by tariff heading 01.02-A II b of the Common Customs Tariff, representing a total value of Lit. 7888410 and a weight of 11470 kg. For this transaction the applicant was required to pay to the customs the sum of Lit. 42660.

The applicant company considers that it was charged more in respect of these three transactions than the sum for which it believes itself to have been liable. The difference between the sum required by the customs and that which the applicant considers should have been payable by way of equalization is a result of a reduction in the rate of the compensatory amounts made in pursuance of Article 5 of Regulation No 1463/73 of the Commission.

The applicant company considered this provision to be unlawful and lodged an application against the Commission of the European Communities under Articles 178 and 215 of the EEC Treaty for compensation for the loss suffered as a result of the application of Article 5 of Regulation No 1463/73 of the Commission.

(b) Regulations involved in this instance

Regulation (EEC) No 805/68 of the Council of 27 June 1968 (OJ Englisch Special Edition 1968 (I), p. 187) established the common organization of the market in beef and veal.

Regulation (EEC) NO 974/71 of the Council of 12 May 1971 on certain measures of conjunctural policy to be taken in agriculture following the temporary widening of the margins of fluctuation for the currencies of certain Member States (OJ, English Special Edition 1971 (I), p. 257) introduced a system of compensatory amounts in trade with Member States and third countries to be applied to products for which intervention measures are provided within the framework of the common organization of the agricultural markets.

This regulation, as amended by Regulation No 509/73 of the Council of 22 February 1973 (OJ L 50 of 23. 2. 1973, p. 1) provides at Article 1 (1) that a Member State whose currency depreciated below the margin of fluctuation shall charge on exports and grant on imports compensatory amounts in trade with Member States and third countries.

In trade with third countries the compensatory amounts granted on imports shall be deducted from the import charge (Article 4a (1) (a)).

In trade between the Member States and third countries, the compensatory amounts applicable due to the [increase] in value of the currency concerned may not be higher than the charge on products imported from third countries (Article 4a (2)).

The detailed rules for implementing this regulation, which might involve other exceptions to the regulations concerning the common agricultural policy, were drawn up in accordance with the procedure laid down in Article 26 of Regulation No 120/67/EEC of the Council of 13 June 1967 on the common organization of the market in cereals (OJ, English Special Edition 1967, p. 33) or, in appropriate cases, corresponding articles of the other regulations on the common organization of agricultural markets.

Subject to the provisions of Article 3, the detailed rules for the application of the regulation involve in particular the fixing of compensatory amounts (Article 6).

Article 6 of Regulation (EEC) No 648/73 of the Commission of 1 March 1973 laying down detailed rules for the application of ‘monetary’ compensatory amounts (OJ L 64 of 9. 3. 1973, p. 1) provides that for the purposes of applying Article 4a (2) of Regulation (EEC) No 974/71 the Commission shall fix the amounts by which the ‘monetary’ compensatory amounts are to be ‘adjusted’ (paragraph (1)). The amounts to be deducted, fixed pursuant to paragraph (1), shall be altered at regular intervals if this is rendered necessary by changes in the charge on imports from third countries.

The compensatory amounts were fixed by Regulation (EEC) No 649/73 of the Commission of 1 March 1973 (OJ L 64 of 9. 3. 1973, p. 7).

The adjustment amounts were fixed by Regulation (EEC) No 905/73) of the Commission of 23 March 1973 (OJ L 92 of 7. 4. 1973, p. 1).

Finally, Regulation (EEC) No 1463/73 of the Commission of 30 May 1973 laying down detailed rules for the application of‘monetary’ compensatory amounts (OJ L 146 of 4. 6. 1973, p. 1) provides at Article 5:

‘1. The Member States shall take the measures necessary to assure that the provisions of Article 4a (2) of Regulation (EEC) No 974/71 are observed. 2. In the case of application of Article 4a (2) of Regulation (EEC) No 974/71 to beef and veal, Member States shall always reduce the “monetary” compensatory amounts by amounts to be established on the basis of the import price calculated in accordance with Article 10 (1) of Regulation (EEC) No 805/68, and for frozen beef and veal on the basis of the world market price established in accordance with Article 13 (1) (b) of that regulation which shall be communicated to them for this purpose.’

(c) Procedure

The application was received at the Court Registry on 13 May 1975. The written procedure followed the 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 holding any preparatory inquiry.

However, the parties replied to certain questions raised by the Court.

II — Conclusions of the parties

The applicant claims that the Court should:

‘State that Article 5 of Regulation (EEC) No 1463/73 of the Commission is invalid on the ground of illegality: (a) In that the reduction of the compensatory amounts by the amount to be deducted is contrary to the purpose of the system of compensatory amounts; (b) In that the abovementioned rule infringes the provisions of Article 4a, and that it constitutes a misuse of powers on the part of the Commission. Therefore, order the institutions of the Communities to make good the damage suffered by the applicant, that is, the amount of Lit. 354669 paid in excess, and to pay the legal rate of interest as well as the costs of the present proceedings.’

The Commission contends that the Court should:

a) Dismiss the application;

b) Order the applicant to pay the costs.

III — Submissions and arguments of the parties

A — Application

Facts

The applicant maintains that the sums to be paid by way of equalization should have been calculated as follows:

As regards the first transaction:

As regards the second transaction:

As regards the third transaction:

In pursuance of Article 5 of Regulation No 1463/73 the rate of the compensatory amounts was reduced from 46·70 to Lit. 41·25 per kilo as regards the first transaction (Regulation No 905/73 of 23 March 1973) and from Lit. 136·78 to 51·30 per kilo as regards the third transaction (Commission Decision of 30 July 1973); this resulted in the applicant company's paying more than it considered itself bound to pay.

Law

1. Infringement of the second and fourth indents of Article 155 of the EEC Treaty, together with Article 1 of Regulation No 974/71

The applicant maintains that when exercising its power to adopt regulations the Commission must confine itself to ensuring the implementation of the provisions adopted by the institutions and exercising the powers conferred on it by the Council. By adopting Article 5 of Regulation No 1463/73 the Commission changed and distorted the nature of compensatory amounts, rendering it impossible to achieve their purpose, which is to compensate the incidence of the widening of the margins of fluctuation for the currencies of certain Member States on the functioning of the agricultural market.

The system of compensatory amounts was introduced in order to avoid a situation in which ‘trade to which the current rate of exchange applies may …be effected at a price, in national currency, lower than the intervention or buying-in prices laid down by Community rules on the basis of the official parity’. It is for this reason, pursuant to Article 1 of Regulation (EEC) No 974/71, that the Member State concerned either grants or charges compensatory amounts, in order to compensate the difference between the official parity and the average of the current rates of exchange.

By Article 5 of Regulation (EEC) No 1463/73 the Commission reduced the monetary compensatory amounts to a level lower than the amounts fixed by the Council in order to compensate for this difference. In the applicant's view this reduction therefore deprived the compensatory amounts of their purpose and led to increases in the prices of imported goods, which resulted in discrimination against traders operating in countries with weak currencies and in favour of traders established in countries with strong currencies, thereby distorting free competition within the common market, in violation, inter alia, of the general principles of Community law on competition.

2. Infringement of the fourth indent of Article 155 of the EEC Treaty, together with Article 4a of Regulation No 974/71

Although Article 4a provides that the compensatory amounts shall be deducted from the import charge, the Commission laid down the contrary provision: the compensatory amounts are to be reduced by certain amounts to be fixed and altered ‘at regular intervals’.

In Regulation No 648/73 the Commission already considered it necessary to ensure that Article 4a (2) of Regulation No 974/71 was being observed and it provided that it was to fix at regular intervals the amount by which the ‘monetary’ compensatory amounts had, where appropriate, to be reduced (ninth recital). In doing so the Commission infringed the rule laid down by the Council in Article 4a (1) of Regulation No 974/71, that is, the deduction of the compensatory amounts from the import charge, which is not the same as a reduction of the compensatory amounts.

The former operation effects an equalization between the credit represented by the compensatory amounts and the debit represented by the import charge, whereas the latter reduces the sum intended to compensate the difference between the conversion rate used in agricultural matters and the conversion rates resulting from the central rate.

3. Further infringement of the fourth indent of Article 155 of the EEC Treaty, together with Article 4a of Regulation (EEC) No 974/71

The applicant recalls that the Council decided that compensatory amounts were to be granted within the limits of the sum owed by way of import charge. If the equalization results in a balance in favour of the importer, this balance is cancelled.

As the compensatory amounts remain unchanged for a given period, the sum owed to the importer may be precisely fixed in respect of each transaction, whereas the import charge is variable: as regards the product in question the charge consists at present in the ad valorem customs duties alone and the value varies according to the category and quality of the product imported.

For this reason, the cancellation of the sum by which the compensatory amounts exceed the ad valorem customs duties and the reduction of the compensatory amounts at regular intervals by a sum fixed theoretically and without regard to the nature of each transaction are two completely different operations.

4. Infringement of the fourth indent of Article 155 of the EEC Treaty, together with Article 145

Under the terms of Article 145 of the Treaty the power to take decisions necessary in order to attain the objectives defined by the Treaty is vested in the Council, while the Commission exercises a power to take decisions within the limits fixed by the third and fourth indents of Article 155 and by Article 162. In drawing up Article 5 of Regulation No 1463/73 the Commission exercised a power which fell exclusively within the area reserved to the Council. Although it stated that it wished to apply Article 4a of Regulation No 974/71 the Commission adopted a rule which was intended to fill the lacuna resulting from the fact that in practice Article 4a is inapplicable to intra-Community trade.

In fact, it is impossible to effect an equalization in such trade in the absence of an import charge.

In the light of the fact that ‘since in the case of beef and veal, the charge on imports includes a customs duty, that charge should be determined at a flat rate …’, the Commission decided that. compensatory amounts which exceed the charge on imports fixed at a flat rate were to be reduced by this excess amount. However, the import charge referred to by Article 4a represents a different concept from that of the import charge which is fixed theoretically by the Commission as the weighted average of the ad valorem customs duties imposed on the various categories and qualities of goods. Therefore, the legal basis for the amount to be deducted, which is fixed by the Commission, is not to be found in Article 4a, as that amount does not reflect the excess amount of the credit represented by the compensatory amounts as compared with the debit represented by the import charges. The system adopted introduces a new rule which was drawn up by the Commission in full knowledge of its innovatory effect.

The misuse of powers on the part of the Commission also constitutes an infringement of the said Article 4a. As it anticipated that in certain cases it would not be expedient to apply Article 4a the Council wished the Commission to restrict itself to submitting proposals to the Council in accordance with the voting procedure provided for in Article 43 (2) of the EEC Treaty. It therefore reserved to itself the power to allow possible exceptions to the rule and thus by implication excluded the attribution of any legislative power to the Commission in this area.

B — Defence of the Commission

In its defence the Commission maintains that the present proceedings are not an application for damages but merely for the ‘recovery of undue payment’.

However, the Commission raises no formal plea of inadmissibility and refers the question to the wisdom of the Court.

As regards the substance of the application the Commission recalls that Article 5 (1) of Regulation No 1463/73 implies that the Commission is to fix the compensatory amounts which are theoretically applicable by means of the Management Committee procedure. For their part, the Member States are required to compare, in practical terms, the amount which is theoretically applicable and the import charge imposed on the same product, for the purposes of the possible application of the alignment rule laid down by Article 4a (2) of Regulation No 974/71.

The basis of the specific application of this rule to beef and veal (Article 5 (2) of Regulation No 1463/73) is to be found in the existence of an ad valorem duty on imports from third countries. This fact would raise no special problems for the application of Article 4a if the compensatory amounts were applied solely to imports from third countries. Trade between the Member States must,

however, be taken into account since the compensatory amounts were primarily designed for that trade.

It must therefore be borne in mind that:

a) The compensatory amounts applied in trade between the Member States must be the same as those applying to trade with third countries if deflections of trade are to be avoided.

b) In trade between Member States the application of Article 4a poses problems in that the import charge to which the compensatory amount must be compared consists of a percentage of the value of the product: in order to convert this percentage into a monetary amount the value of the goods must be checked; this operation constitutes a serious obstacle to intra-Community trade and is one for which the customs authorities in the Community are no longer equipped since the elimination of intra-Community customs duties. The customs authorities must carry out a complicated calculation in order to determine a hypothetical import charge, the amount of which represents the maximum monetary compensatory amount.

Complications also arise in the case of exports to third countries, as in such cases the customs authorities do not normally carry out any check on the value of the product.

The considerations set out under (a) require the extension of the flat-rate system to imports from third countries and as a result of those under (b) the alignment referred to in Article 4a of Regulation No 974/71 must be carried out at a flat rate.

The flat-rate system in question is that provided for in Article 5 (2) of Regulation No 1463/73, under which any reduction of the compensatory amount is calculated in the following way: the Commission fixes the import charge for beef and veal from third countries on the basis of prices determined pursuant to Article 10 (1) of Regulation No 805/68 and this flat-rate charge also constitutes the maximum compensatory amount applicable in trade both between the Member States and with third countries.

Thus, as regards, for example, the first transaction in dispute, the import charge was fixed at Lit. 4125. As the compensatoriy amount for this product is Lit. 4670 an adjustment amount of Lit. 545 must be deducted from it in order to adhere to the maximum figure imposed by Article 4a (2) of Regulation No 974/71.

This method of calculation was adopted in Regulation No 905/73.

In terms of the applicant's argument, the goods imported from third countries would have attracted a compensatory amount of Lit. 4670 and the same goods could have been re-exported, for example, to Germany, paying, also by way of a compensatory amount, Lit. 4125. From an economic point of view such a difference might of itself justify deflections of trade and it is clear that in such a situation there would no longer be any trade between Member States with strong currencies and third countries; all imports would be made via Member States with depreciated currencies.

The Commission observes that liability on the part of the Community presupposes the fulfillment of a series of conditions regarding the unlawful nature of the action for which the institutions are criticized, the reality of the damage and the existence of a causal link between the action and the damage referred to. With regard to a measure of a legislative nature involving choices as to economic policy the Community cannot be liable unless a sufficiently flagrant violation of a superior rule of law for the protection of the individual has occurred.

As regards the illegality of the contested provision

(a) The exercise of a power reserved solely to the Council

The Commission refers to Article 6 of the abovementioned Regulation No 974/71, by which particularly wide powers are delegated by the Council to the Commission. The limits of this delegation are set by the aims of the system of compensatory amounts itself. The regulation also lays down a series of criteria on which the Commission must base its action.

The detailed rules for the application of the regulation, for which the Commission is responsible, cover in particular the fixing of the compensatory amounts (Article 6 (2)). The fixing of these amounts is not a purely automatic calculation but requires a complex assessment which must take account of fluctuations of currencies and changes in the price levels of products. Of course, the Commission must also, if only indirectly, take account of the interests of individual traders, but its major concern must be to avoid ‘abnormal movements of prices jeopardizing a normal trend of business in agriculture’ and ‘disturbances in trade in agricultural products’. Finally, when introducing the compensatory amounts, account must be taken of the first subparagraph of Article 4a (2) of Regulation No 974/71, which was introduced by Regulation No 509/73.

The Commission fixed the compensatory amounts in the light of this complex situation and attempted to avoid deflections of trade. It performed the task which was entrusted to it within the bounds of the powers conferred by the Council.

(b) Incompatibility with the objectives of the compensatory amounts

As regards this point the Commission emphasizes the importance of Article 4a (2) of Regulation No 974/71 within the system of compensatory amounts, that article being a provision which was intended to prevent imports from third countries at prices below the world market price. However, this rule must not be interpreted solely by reference to imports from third countries, as it provides that the import charge shall also be calculated in order to determine the level of the compensatory amounts applicable in intra-Community trade.

The applicant's interpretation, which results in a separation between the intra-Community and extra-Community markets, amounts to a contraction of the ambit of Article 4a. Furthermore, it is contrary to the aim of the rule, which cannot be interpreted as intending to encourage deflections of trade.

The Commission refers to the case-law of the Court, which confirms the discretionary nature of compensatory amounts (Judgment of 15 January 1974 in Case 154/73, Becher v Hauptzollamt Emden, [1974] ECR 19), lays down in detail the aims of the system of compensatory amounts (Judgment of 12 November 1974 in Case 34/74, Société Roquette Frères v French State, [1974] ECR 1217) and acknowledges the difficulties which result from a variation of the compensatory amounts which may lead to deflections of trade, stating that ‘compensatory amounts are conducive to the maintenance of a normal flow of trade under the exceptional circumstances created temporarily by the monetary situation’ (Judgment of 24 October 1973 in Case 5/73, Balkan-Import-Export GmbH v Hauptzollamt Berlin-Packhof, [1973] ECR 1113).

More recently, the Court has recognized that the Commission has a wide discretionary power in making the assessment provided for by the last sentence of Article 1 (2) of Regulation No 974/71 (Judgment of 14 May 1974 in Case 74/74 CNTA v Commission of the European Communities, [1975] ECR 533).

The rule in question thus appears to be quite lawful.

The applicant must also show that, even if it was unlawful, the reduction of the compensatory amount in the conditions set out constitutes a flagrant violation of a superior rule of law for the protection of the individual.

The applicant company must further explain wherein lies the wrongful act or omission on the part of the Commission, as it is in this instance impossible to deny that the Commission acted in order to protect ‘an overriding matter of public interest’.

As regards the damage suffered, the Commission emphasizes that as the assessment in question is based upon an average value for beef and veal the compensatory amounts are reduced when the prices of the goods imported exceed those adopted by the Commission, and a profit results when the prices of imported goods are lower.

C — Reply

As regards the admissibility of the application the applicant refers to the opinion of the Advocate-General in Case 74/74, which emphasizes the independent nature of an action for damages.

As the measure which it claims to be unlawful may be imputed to the Commission the applicant company considers itself obliged to bring the action for damages against the Community institution responsible for the measure which has injured it.

On the other hand, an action for the recovery of undue payment implies that the claim is addressed to the creditor, from whom a refund is required of the charge imposed. In this instance, as it charged the applicant company the sum of Lit. 333231, the Italian State is the creditor by virtue of the direct effect of the Commission regulation.

As regards the substance, the applicant maintains that the provision of the Commission regulation in question which reduces the compensatory amounts by an amount fixed at a flat rate is unlawful for the reasons put forward in the application. The defects which vitiate the regulation expose the wrongful act or omission on the part of the Commission which consists in the negligent performance of duties, which negligence is of a particularly serious nature in that it takes the form of a general legislative measure which is in conflict with the Council regulation.

Although the Commission regulation is a measure having general application, it adversely affected the applicant company, which was obliged to pay a sum which was not provided for by the Council regulation. (According to the reply, the applicant was obliged to pay a sum which exceeded by Lit. 333231 that payable under Regulation No 974/71 of the Council). This constitutes the causal link, in that without such negligent action on the part of the Commission the applicant would have been required to pay the sum set out in the application.

As regards the violation of a superior rule of law for the protection of the individual the applicant considers that evidence of such a violation lies in the very factors which gave rise to the present action. Free competition, which constitutes one of the basic principles of the Community legal system, is seriously impaired by the regulation in question since there is no guarantee of equal treatment in the imposition of duties under the Common Customs Tariff, and this amounts to imposing on traders a charge which bears no relation to fluctuations of exchange rates. Traders are encouraged to import beef and veal of lower value than that calculated by the Commission in order to make a profit.

Moreover, as a result of the method applied by the Commission Italian traders find themselves in a different position from traders in Member States with strong currencies. This leads to deflections of trade according to the quality of the goods and price discrimination on the basis of the country of origin.

As regards the overriding public interest the applicant does not question the fact that the Commission acted in order to achieve an aim of primary public importance. The existence of the wrongful act or omission is, however, not affected by the fact that there is no intention to harm individuals and, therefore, no question of deliberate injury.

The fact that the applicant company would not have suffered any loss had it purchased products of a lower value than that calculated by the Commission cannot rule out the question of loss suffered by the applicant. Even if other transactions involving an equivalent ‘net subsidy’ existed to compensate for the damage claimed, the loss would remain, since the measure adopted by the Commission does not automatically guarantee the trader a profit equivalent to the loss suffered.

Moreover, Regulation No 974/71 gave rise to rights and duties on the part of individuals. Only reasons of economic policy could justify the infringement of the individual rights thus created and preclude the extra-contractual liability of the institutions. The system established, however, satisfies the requirements of an administrative and practical nature already referred to.

As regards the prohibition contained in Article 4a (2) of Regulation No 974/71 the question arises whether this rule must be interpreted in concreto, that is, if the cancellation of the excess of the compensatory amounts is to be effected case by case, or whether it must be interpreted in abstracto, that is, if the provision obliges the Commission to reduce the compensatory amounts from their inception.

On any interpretation the solution to the problem is offered by the first alternative. Whilst the compensatory amounts must be fixed theoretically on the basis of an average assessment of monetary fluctuations, the import charge cannot be determined theoretically. The variable nature of the value of a currency is not comparable to and does not have the same effects as the verifiable variability of the import charge imposed on beef and veal.

Moreover, if reasons of agricultural economic policy led the Community authority to fix the average value of the product, the Council and not the Commission was competent to do this (cf. Article 13 of Regulation (EEC) No 803/68 of the Council of 27 June 1968, OJ, English Special Edition, 1968 p. 170).

In such cases the Council decided that the value must also be adhered to by the customs authorities in order to ensure equal treatment of importers as regards the collection of Common Customs Tariff duties (8th recital), thus avoiding deflections of trade as a result of the simultaneous application of two different methods of calculation.

The applicant recalls that the purpose of the compensatory amounts is to eliminate or to limit the effect of currency fluctuations on the level of prices within the Community and that the import charge is intended to compensate the difference between prices on the world market and the Community price. It is clear that where the compensatory amounts entail a surplus, the purchase price is reduced to a level below the price on the world market. In order to avoid this Article 4a provided that the compensatory amounts cannot exceed the import charge.

The combined provisions of paragraphs (1) and (2) of that article clearly show that the cancellation of the surplus portion of the compensatory amounts is to be carried out case by case and that an abstract concept of the import charge is not permissible.

In intra-Community trade it is unnecessary to seek to compensate the difference between the price on the world market and the Community price. Similarly, it is unnecessary to avoid a situation in which imports may be effected at a price below that ruling on the world market. The prohibition contained in Article 4a (2) is thus inapplicable to intra-Community trade. The content and the purpose of this provision necessitate the drawing of a distinction between the two markets.

When it mentions trade between Member States, Article 4a is referring to the adjustment to be made between the compensatory amounts and the charge on imports from third countries, that is, to goods in free circulation. In the same way as for goods in free circulation, the problem of adjustment may arise in respect of products imported from third countries and processed in the Member States.

As regards the question of the identical nature of the compensatory amounts applied in trade with third countries and in intra-Community trade, the applicant maintains that this does not involve the extensions of the flat-rate system to imports from third countries.

According to the view held by the Commission itself, Article 4a does not require the amounts to be deducted in respect of trade with third countries to be calculated at a flat rate. The arguments put forward by the Commission regarding the difficulties of calculation and the lack of facilities of the customs authorities dealing with intra-Community trade appear unconvincing.

As regards beef and veal in free circulation, the calculation made by the customs authorities is the inverse of that made on the occasion of imports of those products from third countries, that is, they must subtract the percentage which corresponds to the import charge actually paid in order to obtain the price on the world market. In this way, taking into account the relation between the compensatory amounts and the import charge, the result is either the cancellation of the former or an increase in the duties to be paid.

The claimed lack of facilities of the customs authorities does not correspond to reality in view, for example, of the duties of those authorities under Italian law, which in fact include checks on the value of the products for the purposes of the application of VAT, which exists in all the Member States.

As regards deflections of trade, the applicant maintains that the adverse effects on the market are brought about by the system evolved by the Commission, which increased the anomalies resulting from the application of Article 4a (2). To demonstrate this it is sufficient to recall the Commission's observation concerning the advantage or disadvantage to the trader depending on whether he purchases lower or higher quality products.

The applicant further maintains that the import charge fixed by the Commission differs from that applied by the customs authorities, which is calculated on the basis of the actual value of the goods.

Article 4a does not provide that the Commission shall fix a maximum figure for compensatory amounts but merely that the compensatory amounts must not exceed the import charge.

As regards the example of the re-exportation of goods (cf. Commission's defence), the applicant maintains that when the goods were forwarded to Germany the Italian importer should have paid by way of compensatory amount the very sum paid to him by way of deduction from the import charge. The German importer should have paid by way of compensatory amount the sum that he would have had to pay if he had imported the goods directly from third countries. There is no ‘substantial difference’ here, apart from the higher transport costs borne by the German importer, which could make a deflection of trade profitable.

The applicant company recalls that according to its argument the compensatory amounts are not reduced but are deducted from the import charge, and that any surplus is cancelled.

The wrongful act or ommission on the part of the Community institutions is demonstrated by the arguments which the applicant puts forward. That act or ommission involves the exercise of a legislative power which lies beyond the limits of their competence, the infringement of the provisions of the Treaty concerning the principle of the hierarchy of laws, as well as a serious misuse of powers. The Commission overturned the system established by the Council. It extended the application of the prohibition contained in article 4a (2) which refers to extra-Community trade and thus altered the purpose of that provision. It created a system which, instead of protecting competition and avoiding discrimination, produced the opposite effect, causing the applicant to suffer serious damage. Finally, it justified its actions on the basis of certain requirements of a practical nature, that is, the inability of customs authorities to establish the value of goods, although this operation constitutes one of the main duties of those authorities.

The limits to the Commission's powers which are set by the objective of the system of compensatory amounts preclude the application of Article 4a where those amounts do not exceed the import charge and where it is therefore unnecessary to prevent imports being made at prices which are lower than the world market price.

Finally, the criteria laid down by the Council in its regulation militate against the legality of the system introduced by the Commission.

D — Rejoinder

As regards the illegality of Article 5 of Regulation No 1463/73, the Commission emphasizes the need for a flat-rate calculation in respect of beef and veal.

It was necessary to find a solution which would ensure that the compensatory amounts in extra-Community and intra-Community trade were identical and which was also compatible with the technical and administrative structure of the customs authorities of the Member States.

On this point the Commission recalls that compensatory amounts are applied in intra-Community trade ‘to products originating in Member States and to products coming from third countries which are in free circulation in Member States’ (Article 9 (2) of the EEC Treaty).

However, the applicant limits its arguments to products in free circulation. In fact, the implementation of the solution suggested by the applicant, which is already difficult in the case of goods in free circulation, becomes impossible in the case of products originating in the Member States. Moreover, such a distinction is unacceptable within the context of Article 9 (2) of the Treaty.

The applicant does not explain how the import charge is to be calculated in order to determine the compensatory amounts applicable to goods submitted at the internal frontiers of the Community. The observations put forward in the reply concerning the feared deflection of trade are not convincing. When it claims that the Commission should have provided for the application of the compensatory amounts without any reduction both at the time of importation into Italy and of re-exportation into Germany, the applicant is overlooking, inter alia, the provisions of Article 4a (2) and the ‘upper limit’ rule. It is true that the suggested solution is practicable as regards the first transaction under consideration, since the compensatory amounts do not exceed the import charge.

However, it is not possible to suggest a generally applicable solution, which would be valid in respect of all trade, by reference to an example which is limited to the re-exportation of goods, when it is known exactly to what import charge those goods were subject on importation from a third country and to which Article 4a (2) is not applicable. In fact, goods in free circulation are practically never submitted for export defined so precisely as to their quality, quantity and value.

The third transaction at issue shows the difficulties raised by the proposed solution. In this case, as the compensatory amounts were higher than the import charge, the importer made no payment and had merely to forego the surplus. According to the applicant's argument, on re-exportation of the same goods it would have been necessary to pay the compensatory amounts fixed for those products.

In this example too the applicant is disregarding the provisions of Article 4a (2) of Regulation No 974/71 and is applying different compensatory amounts to the same goods. Such a result is clearly incompatible with Regulation No 974/71. If this is the solution proposed by the applicant the arguments which appear in the defence concerning the example of re-exportation to the Federal Republic must be amended.

In effect, the applicant is limiting the application of Article 4a (2) of Regulation No 974/71 to trade with third countries and disregarding it in relation to intra-Community trade. The result of such an argument would be the application of different compensatory amounts, and, in the case of the third transaction, to render all trade in beef and veal impossible between Italy and Germany.

The Commission maintains that Article 5 of Regulation No 1463/73, which was incorporated into Community legislation for the reasons set out above, is valid. It is undeniable that its application may involve difficulties. In the final analysis, the flat-rate calculation of the import charge results in an average figure and inevitably the application of such a method produces advantages for some and requires sacrifices of others. The Commission recognized the existence of a conflict between the public interest, which is to avoid deflections of trade, and the interest of traders in avoiding any reduction in the compensatory amounts to which they are entitled under the Community legislation in force at the time. The Commission considered that the public interest must be regarded as being of primary importance and that deflections of trade, which are harmful for the common organization of the market in the sector in question, must above all be avoided. As regards this supremacy of the public interest, the Commission refers to the opinion of the Advocate-General and to the judgment of the Court of 14 May 1975 in Case 74/74 CNTA v Commission of the European Communities, [1975] ECR 533).

In this instance the overriding interest of the safeguarding of the proper functioning of the common organization of the market in beef and veal does indeed exist and it has not so far been shown that there is any way to mitigate the problems resulting from the imposition of an ad valorem duty other than the solution adopted by the Commission.

In legislating in this matter the Community makes choices of economic policy and on this point it is sufficient to refer to the opinion of the Advocate-General in Case 43/72 [1973] ECR 1076) and the abovementioned case-law of the Court.

Even supposing Article 5 of Regulation No 1463/73 to be invalid, the non-contractual liability of the Commission is not automatically established. In introducing the system of compensatory amounts the Council exercised powers conferred by the Treaty in the general interest and not in the special interest of certain categories of traders. For this reason Regulation No 974/71 did not lay down superior rules of law for the protection of individuals.

As regards the loss suffered, the Commission considers that the additional sum paid by the applicant as a result of the application of the adjustment amounts should have been Lit. 320729 (93109 + 184950 + 42660) rather than Lit. 354669 (according to the application) or Lit. 333231 (according to the reply).

As regards the wrongful act or omission, the Commission observes that the applicant's arguments introduce into Community law the concept of a presumption of error, whereas in fact the Community can incur extra-contractual liability solely on the basis of a causal link.

The difficulties alleged by the applicant were not caused by negligent or imprudent action on the part of the Commission. In adopting the provision in question the Commission was aware of the favourable or unfavourable consequences for traders which might result. The results were anticipated and, one might say, the risk accepted.

IV — Oral procedure

The parties presented oral argument and gave their replies to questions raised by the Court at the hearing on 25 November 1975.

The Advocate-General delivered his opinion at the hearing on 17 December 1975.

Law

1. In an application lodged on 13 May 1975 the applicant undertaking claims compensation for the damage which it allegedly suffered as a result of the application by the Italian customs authorities of Regulation No 1463/73 of the Commission of 30 May 1973 laying down detailed rules for the application of ‘monetary’ compensatory amounts (OJ 1973, L 146, p. 1); the applicant asserts that Article 5, which was applied in this instance, is void on the ground of illegality in that it unduly reduced the compensatory amounts on imports.

2. It is claimed that as a result of the application of this provision the applicant was wrongly required to pay certain sums by way of equalization between the import charge and the monetary compensatory amounts; it is the repayment of these sums which is sought in this action.

3. The action in fact concerns decisions of the Italian authorities adopted in implementation of Community rules which the applicant regards as unlawful. It thus concerns the legality of the imposition of the sums in dispute by the national authorities responsible for the implementation and enforcement of the provisions concerning monetary compensatory amounts and seeks the reimbursement, by the Community rather than by the national authorities, of the sums which are said to have been improperly charged.

4. The provisions of these rules lay down criteria for the calculation of sums payable by way of equalization between the import charge and the compensatory amounts and therefore leave no doubt that the actual assessment and imposition of the sums due are matters for the national authorities.

5. The question of the legality of such implementing measures adopted in pursuance of Community law is, therefore, a matter for the competent national courts or tribunals to decide, using the procedures laid down under national law and after application, where appropriate, of Article 177 of the Treaty, in particular on questions concerning the validity of the Community provisions applied.

6. The applicant is not therefore entitled to refer the matter to the Court of Justice by the expedient of an action directed against the Community for compensation for the alleged damage in order to obtain a material revision of the said implementing measures.

7. The application must therefore be dismissed as inadmissible.

Costs

8. Under the terms of Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay costs. As the applicant undertaking has failed in its pleas it must be ordered to pay the costs.

On those grounds, THE COURT hereby:

1 Dismisses the application as inadmissible.

2 Orders the applicant to pay the costs.