C-218/82

JUDGMENT OF 13. 12. 1983 — CASE 218/82 JUDGMENT OF THE COURT

CELEX: 61982CJ0218
Datum: 1983-12-13
Källa: eur-lex.europa.eu

THE COURT composed of: J. Mertens de Wilmars, President, T. Koopmans, K. Bahlmann and Y. Galmot (Presidents of Chambers), P. Pescatore, Lord Mackenzie Stuart, A. O'Keeffe, G. Bosco, O. Due, U. Everling and C. Kakouris, Judges, Advocate General: S. Rozès Registrar: P. Heim

gives the following

JUDGMENT

Facts and Issues

The facts of the case, the course of the procedure and the conclusions, submissions and arguments of the parties may be summarized as follows:

I — Facts and written procedure

Article 2 (1) of the Second ACPEEC Convention signed at Lomé on 31 October 1979, provides that “products originating in the ACP States shall be imported into the Community free of customs duties and charges having an equivalent effect”. Protocol No 5 to the Convention creates an exception to this rule with respect to rum.

Article 1 of Protocol No 5 states:

“Until the entry into force of a common organization of the market in spirits, products of tariff subheading 22.09 C I originating in the ACP States shall be imported duty free into the Community under conditions such as to permit the development of traditional trade flows between the ACP States and the Community and between the Member States.”

The purpose of Protocol No 5 is to preserve and develop traditional trade patterns in rum. Essentially there are two main trade flows in rum existing within the Community. The United Kingdom has generally imported rum from the Commonwealth members of the ACP whereas other Member States, notably Belgium, the Federal Republic of Germany and France consume, for the most part, rum produced within the Community itself, that is in the French Overseas Departments.

The objective of Protocol No 5 is to develop traditional trade flows in rum while limiting the amount of rum which can be imported free of customs duties into the Community.

Article 2 provides:

“(a) For the purposes of applying Article 1 and by derogation from Article 2 (1) of the Convention, the Community shall each year fix the quantities which may be imported free of customs duties on the basis of the largest annual quantities imported from the ACP States into the Community in the last three years for which statistics are available, increased by an annual growth rate of 40% on the market of the United Kingdom and 18% on the other markets of the Community. (b) Where the application of the provisions of the point (a) hampers the development of a traditional trade flow between the ACP States and a Member State, the Community shall take appropriate measures to remedy the situation. ...”

To give effect to the Protocol, the Community, adopts a regulation annually which, on the one hand, sets out the quantity of rum originating in the ACP States which can be imported into the Community free of customs duties and, on the other hand, divides that quota among the Member States.

Regulation No 1699/82 fixes the tariff quota for the products in question for the year 1982/83. Article 1 fixes the Community tariff quota at 193178 hectolitres of pure alcohol. Article 2 provides that the tariff quota should be divided into two instalments. The first instalment of 125430 hectolitres is to be for United Kingdom consumption. The second instalment of 67748 hectolitres is to be divided among the other Member States. Article 4 (1) obliges Member States to inform the Commission each month of imports charged against the tariff quota. Article 4 (2) states :

“The United Kingdom shall take the steps necessary to ensure that the quantities imported from the ACP States under the conditions laid down in Articles 1 and 2 are restricted to those meeting its domestic consumption requirements.”

The Commission, in an application registered at the Court on 13 August 1982, requests the Court to declare Regulation No 1699/82 void in that Article 4 (2) of the regulation constitutes a breach of Articles 30 and 34 and consequently of Article 9 of the EEC Treaty.

The French Government, by an application registered at the Court on 16 December 1982, requested permission to intervene in the proceedings. By an order of 19 January 1983 the application of the French Government to intervene was allowed.

The written procedure followed the normal course. Having heard the report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without holding a preparatory inquiry.

II — Conclusions of the parties

The Commission claims that the Court should:

1) Declare Regulation No 1699/82 void;

2) State that the effect of Article 1 of the_ said regulation shall be considered as definitive;

3) Order the Council to pay the costs.

The Council requests the Court to:

1) Dismiss the application as unfounded;

2) Order the applicant to pay the costs.

III — Submissions and arguments of the parties

The Commission submits that Article 2 (2) of Regulation No 1699/82 is contrary to Articles 30 and 34 of the EEC Treaty and consequently contrary to Article 9 of the Treaty. The purpose of Article 4 (2) is to require the United Kingdom to prevent the movement of spirits from its territory. The Commission draws the Court's attention to the French version of the provision which reads:

“Le Royaume-Uni prend les mesures nécessaires pour que les quantités importées des États ACP dans les conditions fixées aux articles 1 et 2 soient réservées aux besoins de sa consommation intérieure.”

This wording, the Commission contends, leaves no doubt that the object of the provision is to prevent the re-export to other Member States of the Community of the spirits in the United Kingdom instalment. It is therefore contrary to Article 34 of the Treaty.

The regulation, by restricting exports from the United Kingdom, excludes the possibility of other Member States importing any of the spirits from the United Kingdom. It is therefore contrary to Article 30 of the Treaty.

The disputed provision is also contrary to Article 9 of the Treaty as the products in question are in free circulation in the Community.

The Commission does not accept that Article 4 (2) can be interpreted as requiring the United Kingdom to restrict the import of quantities of the spirits within the instalment of the quota intended for the United Kingdom because:

i) the basis of the instalment is that it is for United Kingdom consumption (Article 2) and it is calculated on the basis of the largest quantity imported annually into the United Kingdom during the three previous years and taking account of the growth rate of 40% on the market of the United Kingdom;

ii) it is not therefore intended to represent a figure other than one of actual imports for consumption;

iii) for the United Kingdom to refuse to accept its instalment, even if it could, would be contrary to the principal object of the regulation and to the commitment in Protocol No 5 annexed to the Second ACP-EEC Convention, which is to grant the right of entry of the whole quota;

iv) it would be unlawful for the United Kingdom to refuse to accept its instalment as the opening of the quota including that instalment is an act of the common commercial policy of the Community, which the United Kingdom is not competent to modify.

Although the object of the regulation is to give effect to the Community's commitments in the Second ACP—EEC Convention, this does not justify a breach of the fundamental principle of the free movement of goods.

The Community institutions must, in the exercise of their powers, respect the unity of the market. In order to introduce measures which run counter to that principle it is necessary to find in the Treaty a provision which either expressly or by necessary implication provides for or authorizes the introduction of such measures (Joined Cases 80 and 81/77 Ramel v Receveur des Douanes [1978] ECR 927).

The Commission is of the opinion that the Community's obligations under the Second ACP—EEC Convention could be met in a manner consistent with maintaining the free movement of goods within the Community, which it sets out in its proposals to the Council. These proposals envisage a Community reserve, arrangements for its sharing and for returning unused parts of the quotas to the reserve.

The Commission argues that any threat to the legitimate interests of a Member State which might arise could be adequately protected by an exercise by the Commission of its powers under Article 115 of the Treaty.

The Commission does not deny that the Council has a duty to enact a regulation to give effect to the Community's commitments. It therefore submits that the Court in the exercise of its powers under Article 174 of the Treaty should state that the right to import duty free into the Community from 1 July 1982 to 30 June 1983 the quantities of goods set out in Article 1 of the regulation should be considered definitive.

The Council in its defence rejects the Commission's submission that Article 4 (2) of Regulation No 1699/82 constitutes an obstacle to the free movement of goods within the Community. The true meaning of Article 4 (2), it claims, may only be ascertained by examining the background to Regulation No 1699/82.

Regulation No 1699/82 is designed to implement Protocol No 5 to the Second ACP—EEC Convention. The Council considers that the system of calculating the quotas to be imported into the Community is compatible with the terms of the Protocol. Similar arrangements involving the total distribution of a tariff quota have been before the Court in Case 131/72 Grosoli [1973] ECR 1555, Case 35/79 Grosoli [1980] ECR 177 and Case 124/79 van Walsum [1980] ECR 813, in which it has not been suggested that these arrangements are contrary to Community law. Provision for a reserve as suggested by the Commission would make the entire system more flexible but, according to the Council, would have been undesirable given the sensitivity of the products in question on the Community markets.

The existence of a reserve would have made it possible for the Member States to draw on the reserve, thus leading to their share of the quota and the annual growth rate being exceeded.

Given the circumstances in which Regulation No 1699/82 was adopted, the Council argues that Article 4 (2) is not to be interpreted as prohibiting the reexport of rum from the United Kingdom but rather as imposing an obligation on the United Kingdom to limit the quantities imported to those intended for domestic consumption.

This interpretation of Article 4 (2) is based on the English version of the text. The Council admits that the French version of the text is susceptible of being interpreted as a prohibition on re-export. However, the Council submits that in the present case particular weight should be given to the English text because it is the language of that Member State and because is results in a less onerous obligation for the Member State concerned.

The Council draws the Court's attention to the measures taken by the United Kingdom to fulfil its obligation under the regulation. Provision for the administration of the United Kingdom's share of the tariff quota is made by the Customs Duties (Quota Relief) Order 1982, Statutory Instrument 1982, No 884. According to this Order goods shall be treated as forming part of the relevant United Kingdom quota on acceptance of an entry for home use accompanied by the relevant documents. The Council understands that the practical effect of the Order is that the goods will not be admitted to the tariff quota unless excise duty is paid when the entry for home use is accepted. There is no prohibition on re-export, but home status is irreversible and repayment of excise duty is not obtainable. The Council points out that the re-export would not be economically profitable due to non-repayment of the excise duty. If re-export does not in fact take place this might be due to economic considerations or to the fact that the amounts imported under the quota for domestic use are limited to those required for home consumption and there is, therefore, no surplus available for export.

The Council acknowledges that the provisions of the Treaty relating to the free movement of goods are also applicable to the Community institutions, including the Council. However, the Council submits that, when adopting secondary legislation, the Community legislature may make provisions which would be contrary to the Treaty if made by a national legislature. The Council recalls the recognition by the Court of the existence of a power to institute charges for veterinary controls (Case 46/76 Banhtiis v The Netherlands State [1977] ECR 15) and that the Court in several judgments has acknowledged the legality of monetary compensatory amounts.

The Council argues that the Court should, in determining what constitutes a measure having equivalent effect, weigh the purpose and advantage of the measure against any potentially restrictive effect the measure might have, particularly where the object of the measure is the fulfilment of the Community's international obligations.

The method of calculating the annual quota of rum for the United Kingdom and the provision inserted in Article 4 (2) to ensure that imports charged against the United Kingdom instalment are in fact intended for consumption in the United Kingdom, give effect to Protocol No 5, whilst at the same time taking account of the sensitivity of the product on Community markets and in particular of the need not to jeopardize the traditional outlets for rum produced in the French Overseas Departments.

The Council rejects the argument of the Commission that if its proposal had been adopted, the legitimate interests of one or more Member States could be protected by virtue of Article 115. Article 115, the Council states, applies only where national measures of commercial policy exist in the absence of any common commercial policy; in the present case a Community regulation based on Article 113 exists and its subject-matter forms part of the common commercial policy.

Finally, the Council points out that it has, since 1975, adopted nine regulations with essentially the same provisions. Until the present case the validity of these regulations has never been questioned either by the Commission or by any other interested party.

The Commission, in its reply, states that it has expressed doubts as to the compatibility of certain provisions of the Council regulations with the provisions of the Treaty relating to free movement of goods. In the face of the persistent refusal by the Council to take account of these observations, the Commission made the following declaration which was recorded in the minutes of the Council meeting which adopted Regulation No 1699/82:

“(a) The Commission notes that certain provisions adopted by the Council in the regulation opening the Community tariff quota for the import of the products falling within subheading 22.09 C I of the CCT originating in the African, Caribbean and Pacific States are incompatible with the rules of the EEC Treaty. As it had informed the Council in COM(82) 243 final, the Commission firmly intends to have recourse to the provisions of Article 173 of the Treaty. (b) Abolition of the Community reserve The Commission regrets the fact that the Council's draft regulation adopted by the Working Party excludes the constitution, proposed by the Commission, of a Community reserve.”

Turning to the method of calculating the rate of increase of the quantities of rum to be imported, the Commission argues that to allow the United Kingdom a higher growth rate than that of the other Member States does not imply that the quantities as progessively increased are to be restricted to consumption within the United Kingdom.

As to the procedure adopted by the United Kingdom to implement Regulation No 1699/82, the Commission says that it limits the free movement of goods from the United Kingdom in that it imposes a financial burden on any proposed export from the United Kingdom to any other Member State of the Community of goods covered by the Protocol. If the Council accepts that such a measure complies with Article 4 (2) of the regulation, it is admitting that the regulation is illegal in that it creates barriers to the movement of goods from the United Kingdom.

The Commission does not accept that the Council has power to impose restrictions on the free movement of goods in order to give effect to its international agreements. The enactment of a regulation which requires the compartmentalization of the Community, not to protect the lawful interests of a Member State but to prevent a Member State from exporting to all other Member States, is not within the competence of the Council.

The Council, in its rejoinder, argues that Article 2 (a) of the Protocol which provides for a method of calculation of the annual quantities increased by a yearly growth rate of 40% on the market of the United Kingdom and 18% on the other markets of the Community clearly implies that it cannot have been intended to grant the ACP States a right to duty-free importation of the whole of the Community's annual quota into the United Kingdom, regardless of whether the imports were intended for consumption in the United Kingdom or in the other Member States. It was intended that separate instalments should be fixed for the United Kingdom and the other Member States. It follows that the Community is entitled to take steps to ensure that amounts charged against the United Kingdom instalment at the time of importation are intended for United Kingdom consumption.

The Council feels that there would be no purpose in the export from ACP countries of rum duty free to the United Kingdom unless there was a market for it there. If there was no market in the United Kingdom the quantities in question could be exported directly to the other Member States as opposed to being imported into the United Kingdom and exported from there to other Member States.

The French Government, in its intervention, points out that the French and English versions of Article 4 (2) of Regulation No 1699/82 have two different meanings. Whilst the French version may be interpreted as being intended to have a restrictive effect on trade within the common market, the English version must be interpreted as providing for “voluntary restraint” in respect of United Kingdom imports, taking effect at the external frontiers of the Community. In the opinion of the French Government, the English version of Article 4 (2) should prevail as the provisions relate to the United Kingdom alone.

Article 4 (2) does not lay down and is not intended to bring about any quantitative restrictions on imports by other Member States. It is not, therefore, contrary to Article 30 of the Treaty.

Article 4 (2) imposes three obligations on the United Kingdom:

1. The quantities imported by the United Kingdom in respect of its share of the quota must originate in the ACP States.

2. They must be free from customs duties as long as its share has not been exhausted.

3. They must correspond to the domestic consumption requirements of the United Kingdom market.

The United Kingdom authorities must ensure that these conditions are observed. There are no further obligations imposed on the United Kingdom Government. Since there is no provision prohibiting the re-export of rum, Regulation No 1699/82 docs not infringe Article 34 of the Treaty.

In order to ascertain the true meaning of Article 4 (2), proper regard must be had to the context in which it was adopted.

The purpose of the Protocol on rum is to ensure the development of existing traditional trade flows between certain ACP States and the United Kingdom on the one hand and between the Overseas French Departments and other Member States on the other hand. It is clear from Article 1 of the Protocol that the development of one trade flow must not inhibit the development of the other traditional trade flows. The French Government considers that the system chosen by the Council is the best method of ensuring the achievement of this objective. The division of the whole of a quota amongst the Member States has been used for other products in the Community (Council Regulation No 3378/82 of 8 December 1982 applying generalized preferences for 1983 in respect of certain industrial products originating in developing countries (Official Journal 1982, L 363, p. 92) and Council Regulation No 2787/79 of 10 December 1979 opening, allocating and providing for the administration of Community tariff quotas for certain products originating in developing countries (Official Journal 1979, L 328, p. 1)). The system is not contrary to the Protocol and furthermore it does not seem to infringe the Treaty (Case 131/73 Grosoli [1973] ECR 1555, Case 35/79 Grosoli [1980] ECR 177, Case 124/79 van Walsum [1980] ECR 813).

Article 4 (2) reflects the objectives of the Protocol. It obliges the United Kingdom to ensure that exports to the United Kingdom market correspond to its consumption requirements and not to any desire to circumvent the growth rates fixed by the Protocol for the calculation of the tariff quota.

The French Government considers that the system adopted is sufficiently flexible. The quota is divided among the Member States on an annual basis which enables it to be adapted to demand. Article 2 (c) of the Protocol enables the Council to review the annual percentage increases fixed by the Protocol should the consumption of rum increase significantly in the Member States.

IV — Oral procedure

At the sitting on 28 June 1983 oral argument was presented for the Commission by its Legal Adviser, D. W. Allen, acting as Agent, assisted by X. Yataganas, a member of its Legal Department, and by O. Zybon and A. Tepas, Experts, for the Council by D. Gorden-Smith, Director-General of the Legal Department of the Secretariat General of the Council in Brussels and by B. Hoff-Nielsen, acting as Agents, and for the French Government by G. Guillaume, acting as Agent, assisted by A. Sortais.

The Advocate General delivered her opinion at the sitting on 4 October 1983.

Decision

1. By application lodged at the Court Registry on 13 August 1982, the Commission of the European Communities brought an action under the first paragraph of Article 173 of the EEC Treaty for a declaration that Council Regulation No 1699/82 of 24 June 1982 opening, allocating and providing for the administration of a Community tariff quota for rum, arrack and tafia, falling within subheading 22.09 C I of the Common Customs Tariff and originating in the African, Caribbean and Pacific States (ACP) (1982/1983) (Official Journal 1982, L 189, p. 1) is void.

2. Article 2 (1) of the Second ACP—EEC Convention, signed at Lomé on 31 October 1979, provides that “Products originating in the ACP States shall be imported into the Community free of customs duties and charges having equivalent effect.”

3. Protocol No 5 annexed to the Convention creates an exception to that rule with respect to rum. Article 1 of Protocol 5 states:

“Until the entiy into force of a common organization of the market in spirits, products of tariff subheading 22.09 C I originating in the ACP States shall be imported duty free into the Community under conditions such as to permit the development of traditional trade flows between the ACP States and the Community and between the Member States.”

4. The objective of Protocol No 5 is to develop traditional trade flows in rum while limiting the amount of rum that can be imported duty free into the Community.

5. To that end the Community adopts each year a regulation fixing the quantity of rum which may be imported duty free from the ACP States into the Community and allocating that quota amongst the Member States. Article 2 of the Protocol regulates that allocation and provides that the quantities which may be imported free of customs duties are to be fixed annually on the basis of the largest annual quantities imported from the ACP States into the Community in the last three years for which statistics are available, increased by an annual growth rate of 40% on the market of the United Kingdom and 18% on the other markets of the Community.

6. Regulation No 1699/82 fixed the tariff quota for the products in question for the period from 1 July 1982 to 30 June 1983 at 193178 hectolitres of pure alcohol. The quota is divided into two instalments, the first, of 125430 hectolitres, being for United Kingdom consumption, and the second, of 67748 hectolitres, being allocated among the other Member States.

7. Article 4 (2) of Regulation No 1699/82 provides that:

8. According to the Commission the purpose of that provision is to prevent the exportation from the United Kingdom to the other Member States of quantities forming part of the quota allocated to the United Kingdom. The regulation in question therefore infringes Articles 30 and 34 of the Treaty and should therefore be declared void, subject, however, to the Court's declaring the effects of Article 1 of the said regulation to be definitive pursuant to the second paragraph of Article 174 of the Treaty.

9. The Commission is contesting the validity not of the practice of allocating a global tariff quota among the Member States but of the prohibition of reexportation to other Member States which is deduces from Article 4 of the regulation.

10. According to the Council, whose arguments on this point are supported by the Government of the French Republic, the Commission's interpretation of Article 4 as set out above is incorrect. The provision does not have scope attributed to it by the Commission and thus the regulation does not infringe Articles 30 and 34.

11. The Council notes that traditionally more rum from the ACP States is exported to the United Kingdom (where it is intended for domestic consumption) than to the other Member States. Taking that fact into account, Article 2 (a) of the Protocol provides that the growth rate for the development of trade referred to in Article 1 will be different for the United Kingdom (40%) and for the remainder of the Member States (18%) and the regulation reflects those figures in the calculation of the quotas allocated.

12. According to the Council the sole purpose of Article 4 of the regulation, as is clear from the English version, is to impose an obligation of the United Kingdom to import no greater quantity than may reasonably be regarded as corresponding to its domestic consumption requirements, taking into account the aforementioned growth rate, and it does not contain a prohibition against marketing in the other Member States consignments of rum forming part of the United Kingdom's quota.

13. It must be emphasized that if, as the Commission maintains, that provision did contain a prohibition on exportation from the United Kingdom to the other Member States, it would indeed be contrary to the Treaty provisions on the free movement of goods; while, therefore, as the Court has confirmed, division of a global tariff quota into national quotas may, in certain circumstances, be compatible with the Treaty, that is subject to the express condition that it does not hinder the free movement of the goods forming part of the quota after they have been admitted to free circulation in the territory of one of the Member States.

14. It follows from the foregoing that the result of the case before the Court depends on the interpretation to be given to Article 4 of Regulation No 1699/82.

15. The Court takes the view that when the wording of secondary Community law is open to more than one interpretation, preference should be given to the interpretation which renders the provision consistent with the Treaty rather than the interpretation which leads to its being incompatible with the Treaty.

16. In this case the interpretation suggested by the Council is entirely consistent with the wording of the provision in question in its English version without being irreconcilable with the other versions of the provision and it corresponds, moreover, to the objective of Protocol No 5 whose attainment it facilitates.

17. It follows from the foregoing that the contested provision does not require the United Kingdom to limit exports of rum originating in the ACP States to other Member States, as the Commission has maintained, but merely to ensure that the quantities imported into the United Kingdom are limited to those corresponding to its domestic consumption requirements. The contested provision is, therefore, in conformity with the Treaty.

18. Consequently the application must be dismissed.

Costs

19. Under Article 69 (2) of the Rules of Procedure, the unseccessful party is to be ordered to pay the costs. As the Commission has failed in its submissions, it must be ordered to pay the costs, including those of the intervener.

On those grounds, THE COURT hereby:

1 Dismisses the application;

2 Orders the Commission to pay the costs, including those of the intervener.