JUDGMENT OF 28. 2. 1984 — CASE 247/81 COMMISSION v GERMANY

In Case 247/81,

THE COURT composed of: J. Mertens de Wilmars, President, T. Koopmans and K. Bahlmann (Presidents of Chambers), P. Pescatore, Lord Mackenzie Stuart, G. Bosco and O. Due, Judges, Advocate General : G. F. Mancini Registrar: H. A. Rühi, Principal Administrator

gives the following

JUDGMENT

Facts and Issues

I — Facts and written procedure

1. The Gesetz zur Neuordnung des Arzneimittelrechts [Law revising the law on medicinal preparations] of 24 August 1976 (BGBl. I, p. 2445) carried out in the Federal Republic of Germany a “radical and systematic transformation of the law in order to achieve an optimum level of security in the area of medicinal preparations” (explanatory memorandum to the draft Federal Law, Document 7/3060 of 7. 1. 1975 of the 7th Bundestag). Article 1 of that Law contains the Law on the marketing of medicinal preparations (Gesetz über den Verkehr mit Arzneimitteln, known as the Arzneimittelgesetz and hereinafter referred to as “the AMG”). Under the heading “The person responsible for placing on the market”, Paragraph 9 of the latter Law provides that: “Placing on the market” means “keeping in stock with a view to disposal by sale or otherwise, putting up or offering for sale or the disposal by sale or otherwise to third parties” (legal definition in Paragraph 4 (17) of the AMG). “Pharmaceutical undertaking” means “any person who places medicinal preparations on the market under his own name” (legal definition in Paragraph 4 (18) of the AMG).

“(1) Medicinal preparations placed on the market in the area in which this Law is applicable must bear the style or name and the address of the pharmaceutical undertaking.

2) In the area in which this Law is applicable, medicinal preparations may be placed on the market only by a pharmaceutical undertaking having its headquarters in the said area.”

2. The objective of this Law is defined as follows in the above-mentioned Explanatory Memorandum of the Federal Government: Considering that the rules contained in Paragraph 9 (2) of the AMG were contrary to Article 30 of the EEC Treaty and not covered by Article 36, the Commission, by letter of 28 February 1979, initiated the procedure under Article 169 of the EEC Treaty. It received no reply to that letter and, by letter of 11 February 1980, addressed a reasoned opinion to the Federal Republic of Germany. After an exchange of correspondence, in which the Federal Government pointed out that the Länder responsible for applying Paragraph 9 (2) of the AMG, had been asked to cease to apply it, and that, on the occasion of the next revision of the AMG, the Bundestag would be asked to modify the provision in question so that it did not apply to medicinal preparations imported into the Federal Republic of Germany from a Member State, the Commission initiated the present proceedings by application dated 31 August 1981 which was registered at the Court Registry on 10 September 1981. The proceedings were suspended at the request of the Government of the Federal Republic of Germany, pending the debate on a draft amending law. The Bundestag rejected this draft law and the proceedings were resumed in October 1982 and thenceforth took 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 any preparatory inquiry.

“Regarding Paragraph 9 :

The incorporation of this provision in the legislation on medicinal preparations is necessary in order to ensure that, if need be, the person responsible for placing a medicinal preparation on the market can be made amenable to civil or criminal proceedings in the area in which this Law is applicable. This provision is modelled on Paragraph 11 of the Law on medical advertising. Furthermore, where several different persons are involved in the placing of a given product on the market, it requires that responsibilities be clearly defined and ascertainable. For these reasons, all medicinal preparations must carry the name of the person responsible for placing them on the market, whether or not they arc proprietary medicinal products.”

II — Conclusions of the parties

The Commission claims that the Court should:

1) Declare that the Federal Republic has infringed Article 30 et seq. of the EEC Treaty by reserving the placing of medicinal preparations on the market to such pharmaceutical undertakings as have their headquarters in the area in which the Law is applicable;

2) Order the Federal Republic of Germany to pay the costs.

The Government of the Federal Republic of Germany contends that the Court should:

1) Dismiss the application;

2) Order the applicant to pay the costs.

III — Submissions and arguments of the parties

According to the Commission, the provision expressly set out in Paragraph 9 (2) of the AMG, under which medicinal preparations may be placed on the market only by a pharmaceutical undertaking having its headquarters in the area in which that Law is applicable would mean that medicinal preparations may, in principle, be imported without restriction, but cannot be “placed on the market” if that condition is not met. For this reason, the condition imposed on pharmaceutical undertakings is undeniably an import restriction. The restrictions entail a serious interference with the freedom of action of foreign undertakings and a proportional increase in costs.

It was for this reason that Directive 70/50/EEC of 22 December 1969 provided that measures which “make access of imported products to the domestic market conditional on having an agent or representative in the territory of the importing Member State” (Article 2 (2) (g)) must be considered as having an effect equivalent to a quantitative restriction.

The Commission examines the question whether the disputed provision, which in its view is contrary to Article 30, may be justified by Article 36, in particular because of the protection it affords to the life and health of persons and animals.

The Commission concludes that no requirement relating to the protection of health would be affected if a foreign pharmaceutical undertaking marketed in the Federal Republic of Germany, from its headquarters situated in one of the Member States of the EEC, a medicinal preparation manufactured by it. Adequate possibilities also exist for bringing civil or criminal proceedings against undertakings established in other Member States.

The Government of the Federal Republic of Germany sets out the reasons which caused the Bundestag to strengthen the Law on medicinal preparations in 1976. In particular, the Law includes a strict system of surveillance, liability without fault on the part of the pharmaceutical undertaking and increases preventive protection by making breaches of the obligations imposed by the Law punishable by penal sanctions or administrative fines. In the opinion of the German Government, it is very important for the purposes of permanent surveillance, and to ensure respect for the provisions of the Law, to have a person responsible for marketing in the geographical area in which the Law is applicable.

The German Government sees the necessity for a responsible representative in three respects:

1) In the context of continuous surveillance, it was provided that the pharmaceutical undertaking would participate in a system of recording the risks caused by medicinal preparations. In certain cases, it is necessary to withdraw a medicinal preparation from the market immediately and, in that case, it must be possible to identify as quickly as possible all the purchasers and users of defective consignments. Experience has shown that making contact with manufacturers established in certain Member States far from Germany is not easy, leaving aside the problem of language. The only way to ensure effective protection of health is to be able to contact quickly and informally someone responsible for placing the medicinal preparation in question on the market.

2) Furthermore, if there is no such person in the Federal Republic of Germany, individuals harmed by medicinal preparations will have much greater difficulty in bringing civil actions for damages. Although there is a European Convention on Jurisdiction and the Enforcement of Judgments, it is applied only by six Member States and in any event requires a complicated procedure. The enforcement of a judgment in a foreign country also gives rise to uncertainty about public policy reservations and an appreciable risk as regards insolvency.

3) The German Government also considers that the presence of a representative of the pharmaceutical undertaking is necessary in order to ensure the preventive effect of the provisions of the Law relating to penal and administrative sanctions. At present, there is no adequate means of applying those provisions to pharmaceutical undertakings that place on the market in the Federal Republic of Germany medicinal preparations coming from another Member State.

The German Government endorses the opinion of the Bundestag, which rejected the draft amendment to the Law on the ground that the provision in question adversely affected the pattern of trade in medicinal preparations between States only to a slight extent and moreover was justified under Article 36 of the EEC Treaty.

The German Government also refers to the case-law of the Court according to which it is in principle for the Member States, in areas not harmonized, to decide on the degree of rigour in the matter of health protection and to set up the corresponding system of supervision, as long as the national measures do not result in a disguised discrimination against imported goods and as long as the restrictive effects upon trade are not disproportionate to the health policy-objective which is sought to be achieved. The German Government refers to the judgment of 17 December 1981 in Case 272/80, Biologische Producten, [1981] ECR 3277 and to the judgment of 15 July 1982 in Case 40/82, Commission ν United Kingdom, [1982] ECR 2793.

It is clear that the system of protection provided for in the AMG does not have the hidden objective of excluding from the German market medicinal preparations of foreign origin or of discriminating against them. In the opinion of the Federal Government, the questions whether the restriction on the free movement of goods was disproportionate, having regard to the result to be achieved, and whether the objectives of the rules could be attained in an identical manner by other means having a lesser effect on inter-State trade, must be answered in the negative.

The rules in dispute do not require the setting up of additional headquarters, but only that someone — either a subsidiary or a branch of the foreign undertaking, or a third party (other manufacturers of pharmaceutical products, wholesalers or pharmacists) having headquarters in the Federal Republic of Germany — is prepared to undertake responsibility for the distribution of the medicinal preparations. Those conditions do not presuppose any major or costly restructuring of the system of distribution. The Federal Government is unaware of any case in which these questions ever gave rise to problems. In practice, all pharmaceutical undertakings of other Member States either have branches or subsidiaries or close commençai links with German pharmaceutical undertakings, if only for commercial reasons.

In its first directive on pharmaceutical products (65/65, Official Journal, English Special Edition 1965-1966, p. 20) the Council considered that the manufacturer of medicinal preparations and the person responsible for the marketing of them should not be one and the same. The Federal Government cites, by way of example, Article 4 (2), Point 1 and Article 9 which expressly mention the civil and criminal liability of the manufacturer and of the person responsible for placing the product on the market. Compared to the minor restriction on trade in medicinal preparations between Member States, the danger to public health that the AMG seeks to prevent is very great. The German Government considers that for the purpose of making possible permanent surveillance, of guaranteeing the rights of the injured consumer in the area of civil liability and of ensuring the general preventive effect of the penalties provided for in the Law there are no means less stringent than the obligation laid down in Paragraph 9 (2) of the AMG.

The Commission, in its reply, points out that it is aware that the provision in question does not include a formal obligation to set up an additional headquarters in the Federal Republic of Germany, but claims that it is none the less undeniable that, in practice, the provision has that effect. In any event, anyone who declares his willingness to undertake the responsibility for the distribution of a medicinal preparation throughout the entire territory of the Federal Republic of Germany will be paid accordingly.

The Commission considers that the existence of a person responsible for marketing may be a practical advantage in the context of the permanent surveillance of medicinal preparations, but it is not a necessity.

The Commission takes the view that the defendant is unnecessarily dramatizing the situation by claiming, when speaking of the need to withdraw certain medicinal preparations, that such withdrawals are not rare. If a medicinal preparation must in fact be withdrawn within a period of a few hours, the only solution is to warn the population through radio, television and the press.

The Commission also points out that the need to ensure that a civil action for damages can be brought is not essential to the protection of public health. Since criminal offences in this area are generally offences of negligence, the Commission wonders to what extent the possibility of punishing such offences (most frequently by way of fines) has a general preventive effect.

The Commission does not accept the German Government's interpretation of Council Directive 65/65. The Commission reserves the right to pursue its argument to the effect that this provision contains a complete body of rules and that the Member States are therefore in no way entitled to decide that the person responsible for placing a product on the market must have his headquarters within the country.

The Government of the Federal Republic of Germany, in its rejoinder, does not dispute that the contested provision could theoretically, in exceptional cases, make the sale of medicinal preparations imported into the Federal Republic of Germany more difficult. None the less, in practice, all respectable pharmaceutical undertakings have at least one representative in the Federal Republic of Germany. The cost of this is not greater than that incurred by a foreign producer who wishes to maintain relations with the German authorities and his customers from a base situated abroad. Accordingly there can be no question of an appreciable adverse effect on trade between Member States.

Even if the free movement of goods had been adversely affected, this was justified by the need to protect the health of

the German population. The German Government gives several examples of the practice followed by the German supervisory authorities. The German Government considers that effective surveillance is possible only if the customs clearance certificates relating to each individual consignment can be examined at any time by the competent authorities. The need to make inquiries at the premises of the manufacturers established in other Member States sometimes involves a loss of precious time. The authorities cannot, every time they suspect a danger, call for the withdrawal of the product through the press and by radio, since this could damage the reputation of the undertaking involved. Furthermore, foreign undertakings are not always prepared to react immediately.

In spite of its doubts, the German Government proposed that the Bundestag amend the Law as follows:

“In the area in which this Law is applicable, pharmaceutical products may be placed on the market only by a pharmaceutical undertaking having its headquarters in a Member State of the European Community.”

However, the competent committee of the Bundestag was unable to decide to recommend the adoption of that version to the plenary assembly of the Bundestag. The German Government refers to that committee's report.

The German Government considers that the provision is necessary and that its repeal would once again represent harmonization at the lowest level. Furthermore the repeal would injure and discriminate considerably against manufacturers of pharmaceutical products having their headquarters in the Federal Republic of Germany or who have there, in any event, a subsidiary, an establishment or a duly authorized representative. They would all be subject, as in the past, to strict surveillance by the German public health authorities, while manufacturers not represented in the Federal Republic would be able to avoid such surveillance to a large extent. If manufacturers who are nationals of other Member States cease to have a representative in the Federal Republic, that would work to the detriment of the integration of the Common Market.

IV — Oral procedure

The Commission, represented by R. Wägenbaur, a member of its Legal Department, acting as Agent, and by Mr Sauer, Principal Administrator in Directorate General III of the Commission, in the capacity of expert for the Commission, and the Government of the Federal Republic of Germany, represented by J. Sedemund, acting as Agent, presented oral argument at the sitting on 22 November 1983.

The Advocate General delivered his opinion at the sitting on 17 January 1984.

Decision

1. By application lodged at the Court Registry on 10 September 1981, the Commission of the European Communities brought an action under Article 169 of the EEC Treaty for a declaration that by reserving the placing of medicinal preparations on the market to pharmaceutical undertakings having their headquarters in the area in which the German Law on medicinal preparations is applicable, the Federal Republic of Germany has failed to fulfil its obligations under Article 30 et seq. of the EEC Treaty.

2. By virtue of Article 1, Paragraph 9 (2) of the Law of 24 August 1976 revising the law on medicinal preparations (BGBl. I, p. 2445) pharmaceutical products may be placed on the market only by a pharmaceutical undertaking having its headquarters in the area in which that Law is applicable. By so limiting the opportunities for marketing medicinal preparations, that condition is undeniably, according to the Commission, a restriction on imports which entails for foreign undertakings an increase in their costs and which constitutes a serious interference with their freedom of action. According to Directive 70/50 of 22 December 1969, measures which make access of imported products to the domestic market conditional upon having an agent or representative in the territory of the importing Member State are to be considered as having an effect equivalent to a quantitative restriction (Article 2 (3) (g)).

3. According to the German Government, the provisions in question do not constitute an obstacle to imports, since in practice all pharmaceutical undertakings established in another Member State and wishing to export to the Federal Republic of Germany will have recourse to a subsidiary, a branch οίa representative body already established in the territory of the Federal Republic. The obligation to have a representative resident in Germany corresponds therefore to a choice which the undertakings would in any event have to make for commercial reasons.

4. That argument cannot be accepted. According to the consistent case-law of the Court all commercial rules of Member States likely to hinder directly or indirectly, actually or potentially, trade within the Community are to be considered as measures having an effect equivalent to a quantitative restriction. The Court considers in this respect that the disputed provision is likely to involve additional costs for undertakings which find no good reason for having a representative of their own established in the Federal Republic of Germany for the purpose of promoting their exports to that Member State, and which sell directly to several customers. The disputed provision is therefore likely to hinder trade within the Community and in particular parallel imports, and must be regarded as a measure having an effect equivalent to a quantitative restriction.

5. The German Government considers that the disputed measure can be justified on the basis of Article 36 of the EEC Treaty because it is the only one which makes it possible to protect public health in a sure and efficient way. In its view, the obligation to be represented by a pharmaceutical undertaking within its territory corresponds to the need for continuous surveillance of the risks peculiar to medicinal preparations. The competent authorities need to be able to contact a responsible person who has all the necessary documents, in particular so as to be able to identify consignments of defective medicinal preparations, when it is necessary to withdraw those consignments. Experience also shows that there are difficulties in communicating with undertakings established in the most distant parts of the Community. In particular, postal and telecommunication services are subject to interruption due to strikes and the competent authorities of the Länder cannot employ qualified staff speaking all the languages of the Community.

6. The German Government also insists on the need to ensure, through the presence of a responsible person in the territory of the Federal Republic, the effectiveness of the measures adopted in relation to the civil and criminal liability of pharmaceutical undertakings.

7. The principle behind the arguments put forward by the German Government cannot be disputed, inasmuch as, in the absence of adequate harmonization at Community level, each Member State is entitled to take appropriate measures in order to ensure the protection of public health in its territory. However, such measures are justified only if it is established that they are necessary in order to attain the objective of the protection of public health referred to in Article 36 of the Treaty and that that objective cannot be attained by means which are less restrictive of trade within the Community.

8. In this connection, it should be remembered that Council Directive 65/65 of 26 January 1965 on the approximation of provisions laid down by law, regulation or administrative action relating to proprietary medicinal products (Official Journal, English Special Edition, 1965-1966, p. 20) provides that no proprietary medicinal product may be placed on the market in a Member State without the prior authorization of that Member State. The person responsible for placing that product on the market must make an application accompanied by the information and documents set out in Article 4 of the Directive. The authorization to place the product on the market may be refused, in particular if the proprietary medicinal product proves to be harmful, and the authorization can also be suspended or revoked by the Member State concerned. Furthermore, it is provided in Article 13 of the directive that the containers and outer packages of proprietary medicinal products must carry the name or style and the address or registered office of the person responsible for placing the product on the market and, if necessary, of the manufacturer, as well as a reference number allowing identification of the manufacturer's batch from which the product in question comes.

9. The directive provides for the possibility that the person responsible for placing the product on the market may be someone other than the manufacturer but contains no provision giving Member States the right to require that the person responsible for placing the product on the market should be established on the territory of the Member State for which the authorization to place the product on the market is sought. Since the directive is intended to reduce obstacles to trade, its silence may not be interpreted as authorizing Member States to introduce or maintain such a requirement.

10. It should also be noted that the directive applies only to proprietary medicinal products, that is to say, products prepared in advance, and marketed under a special name and in special packaging. As regards the place in which the person responsible for placing the product on the market is established, the parties have not, however, put forward any reason, in the course of the proceedings, for making a distinction between the supervision which may be required in the case of proprietary medicinal products, on the one hand, and that which may be required in the case of other medicinal preparations, on the other.

11. With regard to Article 36 of the Treaty, it is apparent that the objectives that the German Government wishes to achieve in relation to the surveillance of medicinal preparations and the availability of information in case of accident could be fully met by appropriate organizational measures at the stage of the examination of applications and the issue of the authorization to place the product on the market, without there being any need to have a representative on the national territory and still less without there being any need for a pharmaceutical undertaking to act as intermediary. The procedure for obtaining an authorization to place a product on the market necessarily implies contacts between the competent authorities and the person responsible for placing that product on the market, established in another Member State, and these can be renewed, if need be, if difficulties arise in the course of marketing.

12. Furthermore, the procedure of applying for an authorization to place a product on the market has a preventive effect and the possibility that the authorization might be suspended or revoked is an incentive to the manufacturers and the person responsible for placing products on the market to comply with the rules in force, given the impact of such a decision on the undertaking and on its sales. Also, where medicinal preparations imported from another Member State are a source of danger, the authorities of the importing Member State will not fail to contact the competent authorities in the Member States of production which can, in turn, take the necessary measures. There is also the possibility of informing the circles concerned, particularly doctors and pharmacists and, in the event of emergency, of warning the public directly through the press, radio and television.

13. With regard to the German Government's arguments concerning linguistic problems and possible communications difficulties, it should be pointed out that these difficulties can be resolved by the undertakings and by the administrations in the same way as in every other field of trade. The possibility that such difficulties may arise cannot therefore justify the restrictive character of the German legislation.

14. As regards civil and criminal liability, these are matters which are relevant, for the purposes of the protection of human health, only in so far as application of penal provisions may have a preventive effect. It is clear that, as far as effective prevention is concerned, the preliminary formalities connected with the authorization to place products on the market as well as the checks carried out at that stage and possible subsequent checks can provide an adequate safeguard from the point of view of human health. Even though criminal penalties and damages may have a deterrent effect as regards the conduct which they sanction, that effect is not guaranteed and, in any event, is not strengthened, in the case of a manufacturer in another Member State, solely by the presence on national territory of a person who may legally represent that manufacturer.

15. In the light of the foregoing, it must be concluded that the Federal Republic of Germany, by reserving the placing of medicinal preparations on the market to pharmaceutical undertakings whose headquarters are situated in the area in which the Law on medicinal preparations is applicable, has infringed Article 30 et seq. of the EEC Treaty.

Costs

16. Under Article 69 (2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the defendant has failed in its submission it must be ordered to pay the costs.

On those grounds, THE COURT hereby:

1 Declares that, by reserving the marketing of medicinal preparations to pharmaceutical undertakings having their headquarters in the area in which the German Law on Medicinal Preparations is applicable, the Federal Republic of Germany has failed to fulfil its obligations under Article 30 et seq. of the EEC Treaty;

2 Orders the defendant to pay the costs.