Report for the Hearing delivered in Case 281/84
I — Facts and issues
1. The common organization of the markets in the sugar sector, which has existed since 1968 in the European Economic Community and on which the most recent Council Regulation is Regulation No 1785/81 of 30 June 1981 (Official Journal 1981, L 177, p. 4), provides for a combined price and quota system, in which a basic quota, the ‘A quota’, and an additional quota, the ‘B quota’, are allotted to each sugar undertaking. Together the two quotas are the ‘maximum quota’ which may be freely marketed in the common market and which can count on a guaranteed market. There is also a price guarantee for the maximum quota which differs for A and B quotas. For white and raw sugars the system includes inter alia an intervention price fixed annually by the Council. At the same time a basic and a minimum price are fixed for sugarbeet processed respectively into A or B sugar (originating from A or B sugarbeet). The basic price is fixed taking account of the intervention price for white sugar and of fixed amounts representing the processing margin, the yield, undertakings' receipts from sales of molasses and, where appropriate, the cost incurred for the delivery of the sugarbeet to the undertakings. The minimum prices for A and B sugarbeet are a percentage of the basic price. The preamble to Regulation No 1785/81 sets out the reasons for those price mechanisms in the following terms: Third recital: Fourth recital: The regulation provides inter alia for import levies and, to the extent necessary to enable the products to be exported on the basis of quotations or prices on the world market, the grant of export refunds. The marketing year begins on 1 July and ends on 30 June of the following year. In relation to A and B quotas, sugar manufacturers have to agree with beet farmers on deliveries which, having regard to the yield, correspond at least to the basic quota allocated to the manufacturer in question. Sugar manufacturers are required to buy from beet farmers the quantity of sugarbeet which the farmer is entitled to deliver at a price equivalent at least to the minimum price adjusted by increases or deductions to allow for deviations from the standard quality. An undertaking which before sowing has not entered into contracts for delivery of a quantity of beet corresponding to the A quota at the minimum price of A beet must pay for each quantity of beet processed into sugar at least the minimum price. In order to ensure normal supplies to the Community as a whole or to one of its areas, sugar manufacturers are under a standing obligation to maintain a minimum stock of sugar equal to a percentage of their A quota. Each undertaking is free to decide to carry forward the whole or part of its sugar production outside its A quota. The quantities must be notified before 1 February of the current marketing year and be stored for 12 months.
‘to ensure that the necessary guarantees in respect of employment and standards of living are maintained for Community growers of sugarbeet and sugar cane, provision should be made for measures to stabilize the market in sugar and for this purpose there should be fixed annually... an intervention price’;
‘it is necessary that these regulatory measures should provide guarantees which are fair both to manufacturers and to producers of the basic product; ... it is therefore appropriate to fix for beet, in addition to a basic price, minimum prices ... which must be observed when sugar manufacturers buy beet... ’.
2. The various sugar prices, like all the other prices under the common organization of the agricultural markets, were originally fixed in units of account (ECU since 1979) and then converted into national currency on the basis of fixed parities declared and accepted by the International Monetary Fund. Since, however, other parities in the currencies of Member States applied in the economy in general, it proved necessary by means of Regulation No 974/71 of the Council of 12 May 1971 on certain measures of conjunctural policy to be taken in agriculture (Official Journal, English Special Edition 1971 (I), p. 257) to introduce a system of monetary compensatory amounts which in commercial dealings was intended to compensate for the difference between the agricultural conversion rate and the actual rate of exchange by means of the payment or charging of appropriate amounts. Although the system of monetary compensatory amounts in principle allowed support prices fixed in units of account to be maintained at the same amount for all Member States, the system led to price levels in national currency varying from one Member State to another. Any increase in prices in units of account without an adjustment of the fixed parities per se involved a corresponding increase in the difference already existing between the prices in national currency. Consequently, it was necessary to reduce the monetary compensatory amounts. To that end a ‘representative’ rate was introduced in 1975 for all the currencies of the Member States which was closer to economic reality in the agricultural sector and was intended to serve as a basis for the calculation of national agricultural prices.
3. To overcome the difficulties caused by monetary compensatory amounts and to reintegrate the agricultural sector into the general economy by aligning the representative rates on the actual rates (the ‘central’ rates), the Council adopted Regulation No 855/84 of 31 March 1984 on the calculation and dismantlement of the monetary compensatory amounts applying to certain agricultural products. That regulation provided on the one hand for changes in the calculation of the monetary compensatory amounts (Article 1) and on the other for alteration of the representative rates and ‘compensatory measures’ (Articles 2 to 6). Article 2 (1) provided that the annexes to Council Regulation No 1223/83 of 20 May 1983 on the exchange rates to be applied in agriculture (Official Journal 1983, L 132, p. 33) were to be replaced by the annexes to Regulation No 855/84. The result was that the representative rates for the Kingdom of the Netherlands and for the Federal Republic of Germany were reduced from 1 January 1985, for the Netherlands from HFL 2.70981 to 2.68749 and for The Federal Republic from DM 2.51457 to 2.38516. For the remaining Member States, on the other hand, rates were fixed that led to higher prices than the previous rates. Article 2 (2) of Regulation No 855/84 stated that the provisions fixing the previous representative rates were to remain valid except where they conflicted with the provisions of that regulation. In the Netherlands and in the Federal Republic of Germany the new representative rates led to a reduction in support prices from 1 January 1985 expressed in national currency (some 5.2% in the Federal Republic) and consequently to a reduction in agricultural incomes. As compensation, the Netherlands and German Governments were authorized to grant special aid to agricultural producers. Article 3 of Regulation No 855/84 authorized the Federal Republic of Germany to grant such aid which could not exceed 3% of the ex-VAT price paid by the purchaser for the agricultural product. (At the request of the German Government, the Council by Decision 84/361/EEC of 30 June 1984 concerning an aid granted to farmers in the Federal Republic of Germany — Official Journal 1984, L 185, p. 41 —increased the maximum rate of aid from 3 to 5% and authorized the date of commencement to be brought forward to 1 July 1984.) Article 4 of Regulation No 855/84 provided that the Community was to contribute to the financing of the aid on a degressive basis at the rate of 120 million ECU in 1985 and 100 million ECU in 1986. Article 7 of Regulation No 855/84 provides that: Transitional measures necessary for: (i) easing the passage from one system for calculating monetary amounts to the other, (ii) avoiding disturbances following the revaluation of the representative rates of the German mark and the Dutch guilder as at 1 January 1985, may be adopted according to the procedure provided for in Article 6 of Regulation (EEC) No 974/71' (reference to a Management Committee). Regulation No 855/84 entered into force on 1 April 1984. With regard to the date on which the new rates were to take effect, the ninth recital stated:
‘adaptation of these rates must take account of its effects, in particular on prices, and of the economic situation in the Member States concerned; ..., particularly for this reason, it should be stipulated that the application of the new rates will generally be made operative within a reasonable time, linked in principle to the beginning of the marketing year or to a price change, this not to be taken to mean that there can be no immediate entry into force for all sectors in certain cases’.
4. The financial effects of Regulation No 855/84 of 31 March 1984 in the sugar sector must be considered at the same time as the decisions adopted on the same day in relation to prices. Article 1 (2) of Council Regulation No 1105/84 of 31 March 1984 fixing for the 1984/85 marketing year the sugar prices and standard quality of beet (Official Journal 1984, L 113, p. 12) fixed the intervention price for white sugar at 53.47 ECU per 100 kg; applying the representative rate in force until then, that amounts to 134.45 DM per 100 kg but to only 127.53 DM per 100 kg applying the rate in force from 1 January 1985, that is to say there was a reduction in the net intervention price of DM 6.92 per 100 kg. Article 2 of Regulation No 1105/84 fixed the basic price for sugarbeet at 40.89 ECU per tonne delivered at the collection centre. In that respect the preamble to the regulation states: and that those costs which is made up, inter alia, of the sum of ‘the processing margin, estimated at 20.18 ECU’. On the basis of that price, Article 3 of Council Regulation No 1106/84 of 31 March 1984 fixing for the 1984/85 marketing year the derived intervention prices for white sugar, the intervention price for raw sugar, the minimum prices for A and B beet, the threshhold prices and the amount of compensation for storage costs (Official Journal 1984, L 113, p. 14) fixed the minimum prices for A and B beet at 40.07 and 27.81 ECU per tonne respectively.
‘the basic price for beet must take account of the intervention price and of the costs of processing and delivering the beet to factories and be based on an estimated Community yield of 130 kilograms of white sugar per tonne of beet... ’.
‘may be estimated at a flat-rate amount of 22.02 ECU per 100 kilograms of white sugar’,
5. By two identical letters of 9 August 1984 sent respectively to the Council and to the Commission, the three applicants, Zuckerfabrik Bedburg AG, Lehrter Zucker AG and Lippe-Weser Zucker AG, requested the Community under the second paragraph of Article 215 of the Treaty to make good the damage which they had already suffered and would suffer as a result of the price reduction. In that respect the two letters state inter alia:
‘... Regulation No 855/84 ... establishes inter alia new representative rates (green rates) closer to the actual rates of exchange. Since the prices of the various products subject to the common organizations of the market are fixed in ECU, the new representative rates mean a reduction in agricultural prices in national currency for the Federal Republic of Germany and an increase for the other Member States. Whereas for the other Member States the new representative rate applies from different dates according to the product, in the Federal Republic of Germany and the Netherlands it enters into force for all products on the same day, 1 January 1985, that is, for the applicants, ... in the middle of the sugar marketing year. The German sugar manufacturers must therefore pay beet farmers for the 1984 marketing year at the old higher rate of German marks by reason of the representative rate in force until then, whereas for sugar produced from 1 January 1985 they obtain a reduced price in German marks as a result of the new representative rates. That price reduction involves a loss for them of 5.15%, that is DM 6.92 per 100 kg of white sugar (the difference between the old and new net intervention prices) which amounts in practice to a depreciation of their entire sugar stock still available at that date equal to that difference. Since the sale of sugar from the new harvest does not begin until the end of the year and the new intervention price applicable from 1 January 1985 had already had repercussions before that date, the loss in practice affects all 1984 production.’
6. The applicants' request was rejected by the Council and the Commission by letters dated respectively 25 September and 1 October 1984, both referring to the transitional measures which had in the meantime been adopted by Commission Regulation No 2677/84 of 20 September 1984 on transitional measures in readiness for the revaluation of the representative rate for the German mark on 1 January 1985, which was published in the Officiai Journal of 21 September 1984 (L 253, p. 31) and entered into force the same day. The regulation contains certain transitional provisions specific to the cereals, sugar and potato starch sectors. With regard to cereals, the Commission fixed a limit on the quantities which might be delivered to the intervention agencies before 1 January 1985 at the old rate of the German mark. With regard to sugar, the regulation provides on the one hand that the new revalued rate should apply to intervention purchases from 21 September 1984 and on the other that a weighted rate should apply for the conversion into national currency of the minimum prices for sugarbeet which would have to be paid by sugar manufacturers under the aforesaid Council Regulation No 1785/81. Articles 2 and 3 (1) of Regulation No 2677/84 provide: The following reasons are given for those transitional measures in the preamble to the regulation:
As regards offers of sugar accepted by the German intervention agency as from the date on which this regulation enters into force, the buying-in prices for white sugar and raw sugar shall be converted into national currency on the basis of the representative rate valid with effect from 1 January 1985.
1. As regards the minimum prices for A and B sugarbeet referred to in Article 3 of Regulation (EEC) No 1106/84 to be paid in the Federal Republic of Germany by sugar manufacturers to sugarbeet producers for the entire 1984/85 marketing year, these shall be converted into national currency at the following rate: 1 ECU = DM 2.41751.’
‘... where sugar is concerned, the application, with effect from 1 January 1985, of a new representative rate for the German mark and therefore of a reduction in the buying-in price for sugar expressed in national currency as from that date in the Federal Republic of Germany may impel manufacturers to deliver into intervention quantities of sugar normally marketed after that date; whereas a measure identical to that adopted in the cereals sector cannot be applied to sugar owing to the nonexistence in practice of deliveries into intervention in normal market circumstances; whereas provision should therefore be made for the application, as from the entry into force of this regulation, of the new representative rate for the German mark solely in respect of buying-in operations in the Federal Republic of Germany (third recital);
... under the terms of Article 6 of Council Regulation (EEC) No 1785/81 ... sugar manufacturers are obliged to pay beet producers the minimum prices for A and B sugarbeet; whereas, owing to the modification of the representative rate for the German mark on 1 January 1985, these minimum prices expressed in national currency would, in the ordinary course of events, have to change in the Federal Republic on that date; whereas, however, the sugarbeet harvesting and processing season begins in the said Member State in early October and continues until the end of December while the sugar obtained is marketed continuously until the next harvest; whereas, in order to avoid obliging the sugar manufacturers to bear the entire burden resulting from a fall in prices expressed in national currency as from 1 January 1985, the conversion rate used in the calculation of the minimum prices should be adapted for the entire marketing year (fourth recital);
... in order to ensure fair treatment for sugar manufacturers and sugarbeet producers, an average conversion rate should be used for these minimum prices, which should be obtained by weighting, on the one hand, the old representative rate for a period of three months, during which, with the exception of buying-in operations, the mechanisms of the common organization of the market would remain unchanged and, on the other, the new representative rate for a period of nine months (fifth recital);
...’.
II — Written procedure and conclusions of the parties
1. By an application received at the Court Registry on 27 November 1984 the applicants commenced the present action.
2. 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. The parties were invited to answer in writing certain questions.
3. The applicants claim that the Court should: Order the European Economic Community to compensate them for the losses which they have suffered as a result of Regulations Nos 855/84 and 2677/84; Order the European Economic Community to pay the costs.
4. The European Economic Community, represented by the Council and the Commission, contends that the Court should: Dismiss the application as inadmissible and, in the alternative, as unfounded; Order the applicants to pay the costs.
III — Submissions and arguments of the parties
A — Admissibility
1. The Council and the Commission consider that the application is inadmissible. The Council and the Commission contend that an application for damages under the second paragraph of Article 215 of the Treaty is not admissible if the applicants were able to obtain compensation in the national courts for the damage they have suffered. Regulation No 2677/84 brought the date on which the new revalued rate for intervention purchases should take effect forward to 21 September 1984. Consequently, it would have been possible to challenge the national authorities' application of the new rate to intervention purchases before the competent national court as from 21 September 1984. If the Court of Justice, in response to a request for a preliminary ruling from that national court, had subsequently declared Regulation No 2677/84 to be invalid, those concerned would automatically have been entitled to the old rate which was still in force between 21 September and 31 December 1984 on the basis of the rules adopted by the Council, namely Regulation No 855/84. Moreover, Regulation No 855/84 amended the representative rates referred to in Regulation No 1223/83. If, in response to a request for a preliminary ruling on the validity of the date on which the new rate took effect, the Court had declared it invalid, it follows that the old rate would once again automatically apply under Article 2 (2) of Regulation No 855/84 without any prior action on the part of the legislature being needed. In those circumstances the remedy under Article 177 of the Treaty constitutes a sufficient legal guarantee for the applicants and their action for damages is therefore inadmissible. The Commission states that the applicants have assessed their damage in the application only on the basis of the intervention prices whereas on the basis of the actual market prices there may have been no damage at all. So far the applicants have not been able to prove actual damage. Further, the applicants have not supplied all the information which was already in their possession when they brought the action. To allow such a preventative action at a time when the damage was first capable of occurring would ultimately adversely affect the rights of the defence since the defendants would have only two pleadings in which to discuss the question of quantum.
2. The applicants deny that the action is inadmissible. The applicants state that an action for damages as provided for in Article 178 and the second paragraph of Article 215 of the Treaty constitutes an independent remedy; Article 177 affords effective protection to the victim only if he can thereby obtain compensation for the damage he has suffered which would not be the case in this instance. If the applicants were to bring an action against a decision of the intervention agency granting them only the lower intervention price and if the Court, in response to a request for a preliminary ruling, were to declare invalid Article 2 of Regulation No 2677/84 and/or Regulation No 855/84 in so far as it stipulated 1 January 1985 as the date of entry into force of the new rate in the Federal Republic of Germany, the applicants would nevertheless have no right to compensation for the damage in respect of all the stock they held on 31 December 1984. If Article 2 of Regulation No 2677/84 were declared invalid they could claim only payment of the higher intervention price for the quantities which they had offered to intervention and not for the other stock which for both legal and economic reasons they could not offer in its entirety to intervention and for practical reasons could no longer offer when the Court gave judgment. If the Court decided that an important provision of Regulation No 855/84 was unlawful, the applicants would have no possibility of obtaining compensation after the date of entry into force of the new rate without a fresh decision by the Council. Although originally the applicants assessed the damage only by means of the price reduction as reflected in the intervention price, that is because when the action was brought they had no other point of reference. There is no doubt that market price trends are affected by the intervention price.
B — Substance
(i) Liability of the Community
1. The applicants claim that the provisions of Regulations Nos 855/84 and 2677/84 infringe superior rules of law intended to protect individuals which are sufficiently specific to render the Community liable according to the case-law of the Court. The applicants claim that Regulation No 855/84 is unlawful on the following grounds: (a) infringement of Regulation No 1785/81 on the common organization of the markets in the sugar sector; (b) infringement of property rights; (c) breach of the principle of nondiscrimination; (d) breach of the general principle of equality; and (e) breach of the principle of proportionality. The applicants claim that Regulation No 2677/84 is unlawful on the following grounds: (f) ultra vires, and (g) breach of the principle of non-retroactivity. To substantiate their claim that there is a clear breach of the law, the applicants refer inter alia to the following criteria: (i) the importance of the rules infringed; (ii) the limited number of undertakings affected ; (iii) the amount of damage; and (iv) the statement of reasons for Regulation No 855/84 is lacking or inadequate. (a) The applicants consider that Regulation No 855/84 infringes the principles of Article 39 of the Treaty which are implemented in the common organization of the markets in sugar in so far as it continues to require sugar-producing undertakings to pay a minimum purchase price for beet while reducing the intervention price during the marketing year. The margin between the intervention price and the minimum price of beet has thus diminished. That margin is indispensable in order for the sugar industry to pay beet producers the guaranteed price. In that respect the applicants refer to the fourth recital in the preamble to Regulation No 1785/81 which states that it is necessary that the regulatory measures should provide guarantees which are fair both to manufacturers and to producers of the basic product and thus it is intended to protect beet farmers and sugar manufacturers. (b) Regulation No 855/84 also adversely affects property rights in so far as the purchase price of beet is mandatorily imposed on sugar undertakings and the sale price of sugar produced from such beet is indirectly but decisively lowered by the reduction in the intervention price. The regulation thus reduces the value of sugar in stock on 1 January 1985. It is true that a normal revaluation would also depreciate existing stocks of goods but in such case, contrary to the present case, the undertakings affected would have an opportunity to react to the alterations in the rate of exchange. (c) Regulation No 855/84 infringes the principle of nondiscrimination laid down in the second subparagraph of Article 40 (3). The choice of 1 January 1985 as the date for the entry into force of the new representative rate led to a reduction in prices for German (and Dutch) sugar manufacturers which did not affect undertakings in countries with a devalued currency. In such countries the new rate entered into force at the beginning of the sugar marketing year and undertakings were able to pass on to consumers the new higher minimum price of beet since the new higher intervention prices already applied to them. The applicants state that they are not concerned with the future alteration of the price system but only with the transitional period. It is true that that problem is alleviated by Article 3 (1) of Regulation No 2677/84, assuming that that provision remains in force, but it does not completely offset the arithmetical reduction (assessed at DM 2.85 per 100 kg of sugar) in the processing margin itself or the particularly heavy actual loss of profits during the transitional year. (d) In addition, Regulation No 855/84 infringes the general principle of equality according to which burdens provided for or considered necessary under Community law must be distributed equally among all traders. That is not so in the present case for the burden imposed by the price reduction on sugar producers is certainly not in the interests of the sugar industry but in the interest of general policy and possibly in the interests of the Community agricultural policy. The Commission is moreover mistaken in thinking that the burden of the price reduction has been spread fairly within the sugar sector. Thus beet farmers obtained a special aid of 5% by virtue of the Council Decision of 30 June 1984 so that the alteration in the representative rates was hardly a burden to them. For sugar manufacturers, on the other hand, the institution of the average minimum price of beet by Article 3 (1) of Regulation No 2677/84 certainly alleviated the burden arising from the price reduction but did not remove it altogether. That burden could also have been avoided or alleviated if 1 July or 1 October 1985 had been chosen as the date for the entry into force of the new green rates in the Federal Republic of Germany rather than 1 January 1985. (e) Regulation No 855/84 also infringes the principle of proportionality in that the choice of the date on which the monetary measures take effect, namely 1 January 1985, and the exceptional burden involved for the applicants are not necessary to achieve the objective of aligning the representative rates, and such burden is far beyond what is reasonable. The choice of 1 January is a political compromise and it is only on financial grounds that no compensation has been granted for the price reduction. The damage caused to the sugar manufacturing undertakings could have been avoided or at least considerably reduced if the Council had chosen a date other than 1 January 1985. Had the regulation taken effect on 1 July 1984 (or on 1 July or 1 October 1985), the old stocks would certainly have been affected by the price reduction but they would have been considerably less than the stocks held on 1 January 1985. (f) In the applicant's view, Regulation No 2677/84 is invalid as being ultra vires the Commission. The transitional scheme provided for by Article 7 of Regulation No 855/84 ought to have consisted of compensation for the price reduction. Instead of that, the Commission had introduced a new representative rate for German beet farmers and thus a new lower minimum price for beet of the 1984/85 marketing year and had also brought into force the new lower intervention price for sugar on 21 September 1984 instead of 1 January 1985 as would have been normal. In adopting those provisions the Commission had thus amended the provisions of Council Regulations Nos 855/84, 1785/81 and 1105/84 (fixing the intervention prices for sugar, the basic prices and the minimum prices for beet) and consequently, without any enabling power, patently encroached on the powers of the Council. (g) There are serious doubts about the validity of Article 3 (1) of Regulation No 2677/84 which provides for the retroactive reduction in the minimum price of beet for the whole of the 1984/85 marketing year. According to the case-law of the Court, such retroactivity in the law is possible only where the aim to be achieved requires it and where the legitimate expectations of those concerned are duly respected. Even the first of those conditions is not satisfied since the desired aim, which is to avoid obliging the sugar manufacturers to bear the entire burden resulting from a fall in prices' as from 1 January 1985 (fourth recital to Regulation No 2677/84), could also have been achieved by other means, such as the grant of compensation for the fall in prices. No account was taken of the legitimate expectations of sugarbeet farmers since at the time of sowing they could not even suspect that the new minimum price of beet, which had just been fixed by Regulation No 1105/84, would be reduced shortly after the beginning of the sugar marketing year. (h) The applicants recognize that according to the case-law of the Court decisions concerned with economic policy and involving the exercise of wide discretion give rise to liability on the part of the Community only if the institution concerned has patently and seriously exceeded the limits to the exercise of its powers. According to that case-law the relevant criteria include those referred to below. (1) The importance of the rule infringed: in the present case there has been an infringement not only of the principle of equality generally and of its specific embodiment in the prohibition of discrimination but also of the fundamental right of property and the principle of proportionality. (2) The limited number of undertakings affected: in the present case the undertakings affected by the rules at issue make up the whole of the German sugar industry; they total 22 undertakings and constitute a clearly defined group which is numerically limited. Although Regulation No 2677/84 concerns cereals and potato starch, as well as sugar, in neither of those sectors are processors bound to buy the products. On the other hand, the organization of the sugar markets requires the sugar producers to conclude with beet farmers before 1 May of each year contracts guaranteeing the farmers an A quota and a B quota at unilaterally fixed minimum prices. (3) The amount of damage in relation to the normal market risk: in the present case the applicants state that according to their calculations based on the market prices and taking account of the stock actually held on 31 December 1984 the damage totals: Disregarding the transitional scheme of Regulation No 2677/84: 1. For Zuckerfabrik Bedburg AG, DM 8.47/100 kg, 2. For Lehrter Zucker AG, DM 8.92/100 kg, and 3. For Lippe-Weser Zucker AG, DM 9.29/100 kg; Taking account of the provisions of Regulation No 2677/84: 1. For Zuckerfabrik Bedburg AG, DM 4.84/100 kg, 2. For Lehrter Zucker AG, DM 4.61/100 kg, and 3. For Lippe-Weser Zucker AG, DM 5.26/100 kg. The applicants observe that in order to assess the normal market risk it is possible to take either the fluctuations of the market prices on their own or the relationship between the market prices and the corresponding intervention prices, which, according to the structure of the organization of the sugar markets, must ultimately constitute the lower limit of the market risk. The two methods of analysis reveal a risk much lower than DM 2 per 100 kg. For the applicants, the damage shown clearly exceeds that risk and thus goes beyond what they can reasonably be expected to accept. The full size of the losses only becomes apparent if it is borne in mind that the applicants have to cover them from their processing margin (which is the only item in the price of sugar over which the undertakings have any control and out of which they have to cover their losses). Under Regulation No 1105/84 the net processing margin is fixed at 20.18 ECU for white sugar, which, on the basis of the former rate of DM 2.51457, represents an amount of DM 50.74. On the basis of that amount the fall in the price of DM 6.92 means a loss of 13.64%. (4) Objective justification: the applicants state that during the negotiations on Regulation No 855/84 the attention of the Commission and the Council was several times drawn to the need to resolve the problem of the fall in prices for the German sugar producers. The institutions took no account of the problem and the reasons for not doing so were not mentioned or, a fortiori, explained in the recitals to Regulation No 855/84. The measures adopted are therefore not objectively justified.
2. The Council and the Commission observe that the conditions for non-contractual liability of the Community for an unlawful legislative measure are that there must be a sufficiently serious breach of a superior rule of law protecting individuals, that is to say that the institution concerned must have so patently and seriously exceeded the limits to the exercise of its powers that it may be said to have acted almost arbitrarily. The Council and the Commission consider that those conditions are not satisfied in the present case, either in respect of Regulation No 855/84 or, in the Commission's view, in respect of Regulation No 2677/84. (a) The Council and the Commission state that the main objective of the common organization of the market in sugar is, according to the aims of the common agricultural policy as envisaged in Article 39 of the Treaty, to safeguard agricultural income and not to guarantee the level of prices received by the processing industry or the intervention price or a fixed and unchangeable marketing margin between the price of beet and the selling price of sugar. The Commission states that Article 39 of the Treaty does not lay down any rules specifying how and when the Community must fix minimum purchase prices and intervention prices for the benefit of producers. The terms of the limitation on the processing margin of producers might be indicative of an infringement of Article 39 only if one of the objectives referred to in Article 39 were threatened. The rules at issue do not destabilize markets, make supplies to consumers more expensive or adversely affect the standard of living of the agricultural community. (b) The Council and the Commission state that the applicants' claim that their property rights have been affected is not correct. There has been no expropriation of sugar stocks or even a restriction on their use in the present case. The Commission adds that if the applicants' argument were valid, any adjustment in the intervention price and any reduction in the monetary compensatory amounts could amount to expropriation. In addition protection of property does not generally cover capital as such, mere expectation of profit, interests, or possibilities of earnings. (c) The Council states that comparison between German sugar producers and those of other Member States is misleading because they are not in comparable situations vis-à-vis the agri-monetary decisions of March 1984. Only the German and Dutch sugar manufacturers were affected by the revaluation of their national currencies in relation to the ECU. Moreover, the effect, unfavourable or not, of a revaluation is generally regarded as one of the normal risks of trading. If it were not so the competent Community institutions would be appreciably fettered, if not paralysed, with regard to their economic policy. The Council and the Commission draw attention to the effects of the reduction and weighting of the purchase price of beet under the provisions of Regulation No 2677/84. Apart from the market prices there is as a result of that regulation from 1 January 1985 notionally a drop in prices of 1.3% which the applicants have to bear. That drop which moreover would certainly largely have been offset by the receipts obtained before 1 January 1985 can scarcely have caused an appreciable disturbance in the balance of the competitive position of the undertakings concerned. (d) The Council and the Commission deny that Regulation No 855/84 infringes the general principle of equality. The Commission states that the Court has never recognized the principle of equality in relation to public burdens, as claimed by the applicants, for it would lead to liability on the part of the Community legislature even if it had acted lawfully. The Commission observes that sugar manufacturers and beet farmers form part of the same sector. Their legal position is governed by the same organization of the markets. It is clear from the transitional measures introduced by Regulation No 2677/84 that in the present case the financial burdens of the sector arising from the general exchange risk are distributed fairly within the sector. (e) The Council states that in the present case the maximum fluctuation (—5%) of the price or marketing margin as a result of the revaluation is no greater, or certainly not much greater, than the normal price fluctuations which are part of the normal economic risks of a sugar manufacturer. The impact of that measure on market prices or the marketing margin cannot be greater than the effect of an increase in prices in ECU, as happened in the past on the occasion of the annual fixing of agricultural prices. Although the applicants claim that the drop in prices could have been avoided if the rate had taken effect on 1 July 1984, there would certainly have been no fundamental difference for stock from pre-1984 harvests. The Commission states that 1 January 1985 was fixed as the date when the new representative rate took effect as a compromise in the Council in the face of the conflicting interests of the Member States: whereas it was obviously in the interest of the German Government to delay the revaluation of the rate as long as possible, other members of the Council urged that it should take effect on 1 July 1984. The German Government's argument that sufficient time had to be allowed for the introduction of machinery for compensating farmers in view of the complexity of the fiscal questions involved seems ultimately to have led to the compromise of 1 January 1985. Accordingly, the Commission was instructed by the Council to adopt, if necessary, transitional measures in the event of market disturbances likely to arise from that compromise solution. There was no discussion at any time in the Council of machinery for compensating the commercial sector or industrial processors of agricultural products. The Council adopted 1 January 1985 as the date on which the new rate took effect, having due regard to the financial effects and taking the view that they were supportable for all the parties affected. Consequently, in view of the wide discretion which the Council has in adopting legislative measures, there was no breach of the principle of proportionality. Calculation of the actual damage shows that the transitional measures adopted by the Commission have not brought about any adverse effects, at least as far as the applicants are concerned, beyond a uniform reduction in prices at 1 July 1984 (or 1 July 1985). There is therefore no question of an unacceptable and exceptional burden. (f) As regards the applicants' misgivings regarding the division of powers between the Council and the Commission, the Commission observes that in the first place the provisions on such powers are not rules on whose infringement individuals may base claims for damages. Furthermore, the transitional measures adopted by the Commission under the powers given to it by the Council do not alter the basic provisions adopted by the Council since the Commission acted solely under the powers given it by the Council regulation. The Commission simply took the measures which proved necessary to avoid disturbances which might arise from massive intervention on the occasion of revaluation of the representative rate of the German mark on 1 January 1985. (g) As regards the lawfulness of in particular Article 3 (1) of Regulation No 2677/84, the Commission states that in the contracts made between beet farmers and sugar manufacturers the prices of beet are expressed only in ECU and the aforesaid regulation in no way alters the prices in ECU themselves. In addition, there is no fundamental principle in the case-law of the Court prohibiting any retroactive legislation provided that the objective requires it and account is duly taken of the legitimate expectations of those concerned. The measure adopted by the Commission in the present case was necessary. If it had not so acted and if the old, higher rate had continued, the burden would have fallen unilaterally and unfairly on the sugar industry alone. In adopting the decision, the Commission duly took account of the interests of beet farmers, especially as the Council had previously approved aid out of national funds in their favour which led to a reduction in the value-added tax of 5% from 1 July 1984. The Commission moreover denies that the applicants may in an action for damages rely on the infringement of the rights of third parties. (h) As regards the evidence that the alleged infringements are serious, the Council and the Commission make a number of observations : (1) As regards the importance of the rules infringed, the Council observes that that criterion is relevant only if the Court finds that Regulation No 855/84 has infringed a superior rule of law. Since the Council considers that no such infringement can be attributed to that regulation, that point does not have to be considered. The Commission does not wish to challenge the special importance of the rules which the applicants claim to be infringed. But it points out that there was no infringement of the fundamental right of property and the principle of proportionality and that, furthermore, no evidence has been adduced to show that the infringement claimed is sufficiently clear. (2) The Council and the Commission observe that the adverse effects complained of are certainly not confined to a limited number of well-defined undertakings. In the Federal Republic of Germany the entire processing industry and all traders in agricultural products from the three sectors referred to in Regulation No 855/84 (cereals, sugar and potato starch) are affected. The Commission adds that it was not only the German sugar industry but also, albeit to a lesser extent, the Dutch sugar industry which was affected by the problems of the fall in prices. (3) The Council and the Commission contend that the risk to which the contested measure exposed the applicants was certainly no greater than the risks inherent in their commercial activity. The Council observes that compensation can be given only for the adverse effect on the applicants of the application of the weighted rate to the purchase price of beet for the 1984/85 harvest. The applicants admitted that there would have been nothing unlawful and they would have suffered no recoverable damage, at least as regards the 1984/85 harvest, if the revalued representative rate had taken effect on 1 July 1984, that is at the beginning of the sugar marketing year, instead of on 1 January 1985. As regards the old stocks and sugar from the new harvest, the only actual difference between the two dates is that the same depreciation of stocks would, in the case of 1 July 1984, have occurred six months earlier. On the other hand, as regards the difference in the purchase price of beet, in the case of the new representative rates taking effect respectively on 1 July 1984 and 1 January 1985, the amount involved was about DM 1 per 100 kg of sugar whereas the applicants put their trading margin at some DM 50. The maximum effect (-5%) of the revaluation on the market prices of sugar or on the trading margin is not much greater, for example, than the effect of the annual price rise as frequently decided in the past. The Commission adds that on the basis of the figures actually available the damage is much less than DM 2 per 100 kg of sugar, an amount which the applicants regard as within the normal economic risk. (4) In so far as the applicants maintain that the Council took its decision without enough objective reasons, the Commission says that the problems of the sugar industry were not separately discussed during the negotiations in the Council.
(ii) The causal link between Regulation No 855/84 and the alleged damage
1. The Council denies that there is any causal link between the legal measure it adopted, namely Regulation No 855/84, and the alleged damage. Thus the applicants apparently admit that Article 7 of the regulation would have allowed the Commission to adopt a measure providing for a complete compensation such as that recommended by the applicants. If that were so, Regulation No 855/84 could not be the direct cause of the alleged damage.
2. In so far as the Council contends that Article 7 of Regulation No 855/84 allowed the Commission to grant compensation for the fall in prices, the applicants refer to the contentions of the Council and the Commission that Article 7 contains no such power and that the Council has not mentioned or decided any such compensation for the fall in prices.
(iii) Damage
1. The applicants observe that their claim is not concerned with any losses for the last months of 1984 but with the reduction or loss of income from the stocks held on 31 December 1984 due to the measures adopted by the Council and the Commission. The applicants' information concerning the prices they obtained during the last quarter of 1984 and also the sale prices of undertakings published by the German Federal Statistical Office clearly show that sugar manufacturers were not able to maintain the market prices of previous months; on the contrary market prices fell very rapidly in 1984 and from January to March 1985 slipped almost to the level of the new intervention price. To show the damage which they actually suffered, the applicants refer to the account set out below showing at points 1 to 4 stocks held on 31 December 1984 (total figures for quota sugar expressed in quintals—100 kg — of white sugar). The receipts at 6 (a), (b) and (c) show the average receipts for the periods indicated. It is on the basis of those figures, which have all been checked by the Council and the Commission, that the value of the stocks held was calculated as at 31 December 1984, that is before the fall in prices (point 9), and as at 1 January 1985 after the fall in prices (point 10). Zuckerfabrik Bedburg AG Lehner Zucker AG Lippe-Weser Zucker AG 1. Old stock on 30 September 1984 23604 84381 46102 2. Total sugar production for 1984/85 437931 1582799 584709 3. Quantities available 461535 1667180 630811 4. Quota sugar sales (October to December 1984) 92520 543217 187531 5. Total sugar stocks subject to quota on 31 December 1984 369015 1123963 443280 6. Net sale price in DM/100 kg of sugar (average price ex-factory, wholesale, less the sugar tax, costs of packing and marketing, but including the storage levy) (a) From 1 July to 20 September 1984 146.99 146.47 146.90 (b) From 21 September to 31 December 1984 146.40 142.92 144.20 (c) From January to March 1985 138.67 139.27 138.75 7. Value of available stocks in DM (items 3x6 (a)) 67841030 244191855 92666136 8. Value of sales in DM (items 4x6 (b)) 13544928 77636574 27041970 9. Value at 31 December 1984 in DM (before the fall in prices) 54296102 66555281 65524166 10. Value at 1 January 1985 in DM (after the fall in prices, items 5x6 (c)) 51171310 156534327 61505100 11. Loss in DM, disregarding the transitional scheme of Regulation No 2677/84 3124792 10020954 4119066 12. Reduction taking account of the lowering of prices of beet provided for by Regulation No 2677/84 (calculated by the applicants at DM 3.06/100 kg of sugar on the basis of a yield of 13%, item 2 x DM 3.06) 1240069 4843365 1789210 13. Loss in DM taking into account the transitional scheme of Regulation No 2677/84 1784723 5177589 2329856 The applicants thus claim to have suffered the following loss as a result of the measures introduced by the Council and the Commission: Not taking into account Regulation No 2677/84 Zuckerfabrik Bedburg AG DM 3125000 Lehrter Zucker AG DM 10021000 Lippe-Weser Zucker AG DM 4119000 Taking into account Regulation No 2677/84 Zuckerfabrik Bedburg AG DM 1785000 Lehrter Zucker AG DM 5178000 Lippe-Weser Zucker AG DM 2330000 The applicants deny that they made no attempt to mitigate the damage as the Commission and the Council claim. In particular the applicants would not have been able to avoid the loss by offering the old stock to intervention after the publication of Regulation No 855/84. They would not have been able to offer the minimum stock which must be permanently maintained (see Article 12 (1) of Regulation No 1785/81). Only quantities not subject to that requirement could therefore have been offered to intervention, but in practice a large part thereof had to be kept as reserves or for the ‘pipeline’ in view of the vagaries of the harvest or unforeseen needs. Moreover, Regulation No 2677/84 came into effect very suddenly. In any event the stock from the new harvest which made up the major part of the stock on 31 December 1984 could not have been offered to intervention as from 21 September 1984 as the Council claims. The actual price trend clearly shows that exports could not be relied on as a means of avoiding the losses caused by the fall in prices. As a result of surpluses, the market price on the world market fell sharply during the last quarter of 1984 with the result that the export price was substantially less than the domestic price. Nor would it have been possible for the applicants to sell their stocks on the domestic market before the end of 1984. The market prices had already fallen by then since the market was already taking account of the new lower intervention price due to take effect on 1 January 1985. Finally, the applicants would not have been able to dispose of almost the whole of their stocks as from the beginning of the first quarter of the marketing year since prices would have collapsed and traders and processors would not have been prepared to take up such sugar stocks.
2. The Council considers that the applicants have suffered no damage for which compensation is payable under Article 215 of the Treaty. The essence of the applicants' complaint seems to be that, in so far as the stocks at issue are concerned, they had to buy beet at a price determined on the basis of the old rate whereas the sugar obtained therefrom could be sold only at a price determined on the new revalued rate. The applicants therefore advocated that the new revalued rate should take effect on 1 July 1984, the beginning of the sugar marketing year. It is clear, however, that had that been done there would have been the same disadvantage with regard to the alleged fall in market prices but it would have occurred six months earlier. On the other hand, as regards the solution adopted by the Council, it may be observed that on the basis of the figures supplied by the applicants the advantage obtained from higher prices received for part of the 1984/85 harvest sold before 1 January 1985 was greater than the disadvantage arising from the very small difference between the purchase prices of beet. The Council has made the following calculation: Advantage arising from the maintenance of the market prices until 1 January 1985 Quantity of sugar from the 1984/85 harvest sold before 1 January 1985 in quintals of white sugar Price obtained before 1 January 1985 in DM Price obtained after 1 January 1985 in DM Result in DM Zuckerfabrik Bedburg AG 92520 x (146.40 — 138.67) = 715180 Lehrter Zucker AG 543217 x (142.92 — 139.27) = 1982742 Lippe-Weser Zucker AG 187531 x (144.20 — 138.75) = 1022044 Disadvantage resulting from the weighted rate applicable to the purchase price of beet Price of beet in ECU (per 100 kg of sugar) from the 1984/85 harvest on the basis of a yield of 130 kg per tonne (see Regulation No 1105/84) Price of beet in DM in the case of a weighted rate of DM 2.41751 fixed by Regulation No 2677/84 with effect from 21 September 1984 Price of beet in DM if the revalued rate of DM 2.38516 fixed by Regulation No 855/84 had taken effect on 1 July 1984 ECU 40.89:1.3 = ECU 31.45 DM 76.03 DM 75.01 The loss is thus some DM 1 per 100 kg of sugar. In those circumstances the Council draws the following comparison: (a) (b) (c) (d) Production from the 1984/85 harvest according to the information of the applicants (in quintals of white sugar) Loss due to the higher price of beet (column (a) x DM 1) Benefit from the price maintenance in DM Balance in favour of the applicants in DM approx. approx. Zuckerfabrik Bedburg AG 437931 438000 715180 277000 Lehrter Zucker AG 1582799 1583000 1982742 399000 Lippe-Weser Zucker AG 584709 585000 1022044 437000 Moreover, the Council states that the damage claimed by the applicants was foreseeable as from the publication of Regulation No 855/84 on 2 April 1984. The applicants thus had an opportunity of largely avoiding the damage that they claim now to have suffered, in particular by selling their old stock of sugar to intervention at the old rate of the German mark between 2 April and 21 September 1984 (the date on which Regulation No 2677/84 took effect). By preferring to await the transitional measures which they expected from the Commission, the applicants themselves voluntarily accepted the risk of inadequate transitional measures.
3. The Commission takes the view that the applicants are unable to establish damage whatever way the question is considered. The only acceptable method is to make a specific calculation based on the position of the applicant undertakings under Regulation No 2677/84, taking into account actual sales during the last quarter of 1984 and 1985 at the monthly market prices actually charged in so far as such figures are already available. That calculation shows that the applicants, as producers, have suffered no damage attributable to the Commission. A calculation on the basis of the actual sales in 1984 and sales in 1985 (partly based on estimates) and on the basis of the (ex-factory) prices actually charged on the market compared with the intervention price expressed in German marks shows a loss or profit on the processing margin as follows: Zuckerfabrik Bedburg AG DM — 179552 Lehrter Zucker AG DM + 1646111 Lippe-Weser Zucker AG DM + 567168 The result, which is clearly positive for the applicants with the exception of Zuckerfabrik Bedburg AG, is due to the large sales in 1984 which far exceeded the Commission's estimates when it calculated the weighted rate for the minimum prices of beet, namely 25%, and to the ex-factory prices which were higher than the average intervention prices in 1984 and at the beginning of 1985. Zuckerfabrik Bedburg's small loss on its margin is solely due to the fact that its sales for the last quarter of 1984 were less than the average for the Federal Republic of Germany and also less than the Commission expected. The Commission adds that the applicants deliberately did not avail themselves of the opportunity to mitigate the damage which they allege they have suffered. In particular they missed the opportunity to export products in 1984 at unchanged conversion rates. The fact that during the last quarter of 1984 the applicants encountered falling world prices can in no way be blamed on the Commission or the Council. The export refunds fixed under the Commission's tendering procedure were increased during the period in question in accordance with the trend in prices on the world market.
IV — Questions put to the parties
The Court requested:
1. the German Government to produce a table showing (a) the trend in prices on the German market and intervention prices for sugar in German marks, (b) the trend in prices on the German market and the minimum prices of sugarbeet in German marks, for the period from 1 January 1984 to 31 December 1985;
2. the applicants to submit a calculation or estimate, supported by evidence, of the losses they suffered (or any gains they made) as a result of the revaluation of the green German mark as from 1 January 1985 either without or with the benefit of the transitional measures under Regulation No 2677/84 by comparison with the situation if the new green rate had taken effect in respect of all the common prices at issue as from 1 July 1984;
3. the Commission to explain in detail the basis of its calculations and figures in the annex to its rejoinder. In reply to Question 1, the German Government supplied the following information to the Court by letter of 17 April 1986. Summary of market price trends and intervention prices of sugar and the production prices and minimum prices of sugarbeet in the Federal Republic of Germany in 1984/85 in DM/100 kg (excluding value-added tax) Year Jan. Feb. Mar. April May June July Aug. Sep. Oct. Nov. Dec. 1. Market price of white sugar (excluding tax, second category, gross) 1984 147.72 147.71 147.65 147.60 147.62 147.58 147.54 147.58 147.48 146.65 146.53 146.25 1985 140.83 140.08 139.52 139.52 139.52 139.52 141.26 141.55 141.99 140.94 140.88 140.87 2. Intervention price of white sugar (second category, gross) (including storage charges in brackets) 1984 134.45/(145.14) id. id id. id id id id id id id id. 1985 127.53/(137.67) id id id id id 129.23/ (139.37) id id id id id 3. Production price ofA/B sugarbeet 1984 11.10/6.29 id id id id id id id id 9.90/6.03 id id 1985 9.90/6.03 id id id id id id id id 10.67/6.58 id id 4. Minimum price of A/B sugarbeet (sugar content 16%, free delivery) 1984 10.08/6.22 id id id id id 9.69/5.98 id id id id id 1985 9.69/5.98 id id id id id 9.56/5.90 id id id id id By letter of 14 April 1986, the applicants replied to Question 2 giving the following figures for 1 July 1984 and also 1 January 1985 and 1 July 1985: Calculation of losses occasioned by the revaluation of the green German mark (in DM) Zuckerfabrik Bedburg AG Lippe-Weser Zucker AG Lehrter Zucker AG A — Revaluation on 1 July 1984 Loss of revenue (with a fall in the price of sugarbeet of DM 4.07/100 kg) 2993124 3680428 8102505 B — Revaluation on 1 January 1985, without taking into account Regulation No 2677/84 Loss of revenue (without a fall in price of sugarbeet) 2763475 3709138 9902732 C — Revaluation on 1 January 1985, taking into account Regulation No 2677/84 Actual loss of revenue (with a fall in the price of sugarbeet of DM 3.06/100 kg) 1423406 1919928 5059367 D — Revaluation on 1 July 1985 Loss of revenue 800566 1098022 892531 The applicants conclude that if the green rate had been lowered on 1 July 1984 the losses would have been higher than the actual losses only for Zuckerfabrik Bedburg AG while for the other two applicants they would have been substantially lower than they were without the benefit of the transitional rules in Regulation No 2677/84. On the other hand, if the green rate had been lowered on 1 July 1985, the losses would have been considerably less. By letter of 14 April 1986 in reply to Question 3, the Commission explained on what it based its calculation of the applicants' gains or losses on their processing margins as a result of the contested regulations. It stated that a revised calculation on the basis of actual sales in 1984 and 1985 and the actual market prices (ex-factory) shows that all the applicants in fact realized a gain on their processing margin as follows: Zuckerfabrik Bedburg AG: DM 74448 Lehrter Zucker AG : DM 2200091 Lippe-Weser Zucker AG: DM 894605.
O. Due
Judge-Rapporteur
1 Language of the Case: German.
2 The market and intervention prices given for sugar relate solely to white sugar since unrefined sugar was not the subject of any commercial dealings in the Federal Republic'of Germany. The market price of white sugar includes the charge for storage costs payable by the seller. Besides the intervention price the table thus also shows in brackets the intervention price increased by the said charge.
3 There is no market price for sugarbeet sold to sugar refineries at a price fixed before the harvest.
4 The minimum prices of A and B sugarbeet are average prices obtained by weighting the various conversion rates in force.