Report for the Hearing delivered in Joined Cases 194 and 241/85

I — Facts and procedure

A— Case 194/85

Pursuant to an order of the Minister for Trade dated 24 December 1980, as renewed from time to time, imports of bananas into Greece have since 1 January 1981 been subject to the grant of a licence.

The Commission has received complaints from the association of Greek banana importers that requests for licences to import bananas originating in other Member States or in free circulation there have been systematically refused. The Commission took the view that the requirement of an import licence and the refusal to issue such a licence for the abovementioned products constituted measures having an effect equivalent to quantitative restrictions on imports and, after an exchange of letters with the Greek authorities, by letter dated 14 July 1983 initiated the procedure under Article 169 of the EEC Treaty. By letter dated 13 September 1983 from its Permanent Representation, the Greek Government put forward two main arguments, namely: (a) that the refusal to grant licences for the importation of bananas originating in other Member States or in free circulation in the Community was justified under Article 65 (2) of the Act of Accession of the Hellenic Republic to the European Communities since there was a national organization of the banana market in Greece; and (b) the question of the term ‘national organization’ and the necessary conditions for the existence of such an organization were the subject of an action pending before the Simvoulis Epikratias (Council of State) and it was difficult for the Greek Government to reach a decision on any repeal of the contested measures before judgment was given by that court for otherwise there was a risk of its being regarded as an interference in the administration of justice. The Council of State gave judgment on 29 February 1984.

Article 65 (2) of the Act of Accession provides :

‘In respect of products not covered, on the date of accession, by a common organization of the market, the provisions of Title II concerning the progressive abolition of charges having equivalent effect to customs duties and of quantitative restrictions and measures having equivalent effect shall not apply to those charges, restrictions and measures if they form part of a national market organization on the date of accession. This provision shall only apply until the common organization of the market for these products is implemented and not later than 31 December 1985 and to the extent strictly necessary to ensure the maintenance of the national organization.’

On 16 May 1984 the Commission delivered a reasoned opinion stating that by making the importation of bananas originating in other Member States or in free circulation there subject to the grant of an import licence and by refusing to issue such licences for such bananas, the Hellenic Republic had failed to fulfil its obligations under Article 30 of the EEC Treaty. The Commission requested the Greek Government to take measures to comply with the reasoned opinion within a period of one month from its notification.

In a note from the Ministry of Foreign Affairs forwarded to the Commission by the Permanent Representation on 2 July 1984, the Greek Government insisted that there was a national organization of the market in bananas and accordingly Article 65 (2) of the Act of Accession applied; it pointed out that the Council of State had reached a similar conclusion.

Since the Greek Government in its answer referred to certain matters which might be regarded as establishing that there was a national organization of the market in bananas, the Commission, while continuing to challenge the latter contention, sent the Greek Government a supplementary reasoned opinion by letter dated 13 March 1985. The Commission argued that even if there were a national organization of the market, the general ban on the importation of bananas could not be in accordance with Community law since, according to Article 65 (2) of the Act of Accession, quantitative restrictions and measures having an equivalent effect were permissible only ‘to the extent strictly necessary to ensure the maintenance of the national organization’.

The Greek Government replied to the supplementary reasoned opinion by a letter from the Permanent Representation dated 21 March 1985 in which it continued to claim that the general ban on importation was the only measure which appeared necessary and sufficient to protect the national organization of the market in bananas.

The Commission thereupon brought the action in Case 194/85.

The Commission's application was lodged at the Court Registry on 17 June 1985.

B — Case 241/85

By letter to the Greek Government dated 13 December 1984 the Commission observed that it was not possible to import into Greece bananas originating in ACP countries. The Commission pointed out to the Greek Government that the ban contravened in particular Article 3 (1) of the Lomé Convention which prohibits any quantitative restriction or measure having equivalent effect on the importation into the Community of products originating in ACP countries. The Commission linked their infringement with that relating to the importation of bananas originating in and bananas coming from Member States of the Community which is the subject of Case 194/85.

In its reply of 3 January 1985 the Greek Government contended that its attitude in relation to the importation of bananas in general was governed by the fact that there was a national market organization which, in the absence of a common organization of the market, allowed derogation from the rules of free movement of goods by reason of Article 65 (2) of the Act of Accession. The Greek Government came to the conclusion that in so far as it was entitled to ban imports of bananas originating in and bananas coming from Member States of the Community, a fortiori it was entitled also to ban imports of bananas originating in ACP countries since, pursuant to Article 6 of the Lomé Convention, those countries could not enjoy more favourable treatment than Member States.

On 6 June 1985 the Commission delivered a reasoned opinion and requested the Greek Government to comply therewith within a period of 15 days.

By letter dated 12 July 1985 the Greek Government reiterated the arguments set out above.

The Commission thereupon brought the action in Case 241/85.

The Commission's application was lodged at the Court Registry on 5 August 1985.

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.

By order dated 29 January 1986 the Court ordered the cases to be joined for the purposes of the oral procedure and judgment.

II — Conclusions of the parties

The Commission claims that the Court should:

1) Declare that by making the importation of bananas originating in other Member States or in free circulation there subject to the grant of an import licence and by refusing to issue such a licence, the Hellenic Republic has failed to fulfil its obligations under Article 30 of the EEC Treaty (Case 194/85);

2) Declare that, by prohibiting the importation of bananas originating in ACP countries, the Hellenic Republic has failed to fulfil its obligations under the Lomé Convention (Case 241/85);

3) Order the Hellenic Republic to pay the costs.

The Hellenic Republic contends that the Court should:

1) Dismiss the Commission's actions;

2) Order the Commission to pay the costs.

III — Submissions and arguments of the parties

A— Case 194/85

The Commission states that according to the case-law of the Court even the purely formal requirement of import or export licences or any other similar formality in intra-Community trade constitutes, apart from exceptions allowed by Community law, a measure having an effect equivalent to a quantitative restriction prohibited by Article 30 et seq. of the EEC Treaty (judgment of 15 December 1971 in Joined Cases 51 to 54/71 International Fruit Company v Produktschap voor Groenten en Fruit [1971] ECR 1107; judgment of 15 December 1976 in Case 41/76 Donckerwolcke v Procureur de la République [1976] ECR 1921; and judgment of 16 March 1977 in Case 68/76 Commission v French Republic [1977] ECR 515). It is self-evident that the systematic refusal to issue import licences in intra-Community trade constitutes an infringement of Article 30 et seq. of the EEC Treaty.

The Commission challenges the Greek Government's view that Article 65 (2) of the Act of Accession is applicable in the present case on the ground that the production and marketing of bananas is subject in Greece to a national market organization. In the absence of such a national market organization, one of the requisite conditions for the application of Article 65 (2) would not be satisfied and accordingly the Greek Government would not be able to rely on Article 65 (2) in the present case.

The Commission states that the Court has consistently held that a market organization is the ‘totality of legal devices placing the regulation of the market in the products in question under the control of the public authority, with a view to ensuring, by means of an increase in productivity and of optimum utilization of the factors of production, in particular of manpower, a fair standard of living for producers, the stabilization of markets, the assurance of supplies and reasonable prices to the consumers’ (judgment of 10 December 1974 in Case 48/74 Charmasson v Minister for Economic Affairs and Finance [1974] ECR 1383). In the present case, while not denying that various measures have been adopted to protect Greek produce, namely aids and other benefits granted to banana growers who are almost all in Crete, the Commission insists that those measures are not enough to constitute a national market organization. Excessive sums are spent to maintain a costly and inadequate production of poor quality for the benefit of a tiny number of producers and traders but to the detriment of the vast majority of consumers.

Moreover, the Commission refers to the second subparagraph of Article 65 (2) of the Act of Accession which provides that the derogation from the rule on free movement of goods allowed thereby is to apply only ‘to the extent strictly necessary to ensure the maintenance of the national organization’. In the Commission's view, it is plain that if and in so far as it were established that a national market organization does exist, a total ban on imports of bananas into Greece is not a measure strictly necessary to ensure the maintenance of that organization. Since it is an exception to the principle of the free movement of goods, the provision must be interpreted strictly and in that respect the Commission refers to the judgment of the Court of 29 March 1979 in Case 231/78 Commission v United Kingdom [1979] ECR 1447.

The Commission does not consider that the condition in the second subparagaph of Article 65 (2) is satisfied, since the supply of bananas on the Greek market is clearly inadequate. The Greek banana production is from 4000 to 5000 tonnes a year which represents a consumption of 0.44 to 0.55 kg per inhabitant; there are practically no banana imports (none in 1981 and 1982, 3 tonnes in 1983 and 1 tonne in 1984). In other Member States the average annual consumption per inhabitant is 7 kg.

Since Article 65 (2) of the Act of Accession thus does not apply, it follows that pursuant to Article 35 of the Act of Accession the provisions of Article 30 et seq. of the EEC Treaty are applicable in this case. Article 30 prohibits all quantitative restrictions on imports. According to the consistent case-law of the Court, Article 30 applies from the end of the transitional period even in respect of agricultural products (such as bananas) in respect of which no common organization of the market has been set up (judgment of 16 March 1977 in Case 68/76, cited above).

The Greek Government examines the conditions mentioned by the Commission for there to be a national market organization, namely, stabilization of the market, guarantee of supplies, reasonable prices and optimum utilization of the factors of production.

With regard to stabilization of the market, the Greek Government adduces evidence to show that that condition is satisfied since the State regulates production and marketing and fixes not only maximum selling prices but also quality standards and other conditions which bananas must satisfy to be marketed.

As regards the guarantee of supplies, there is throughout the year a large variety of fruit which can quite well replace bananas.

The condition relating to reasonable prices was met by virtue of the fixing of selling prices under the provisions on the regulation of the market. As regards the optimum use of the factors of production, the Greek Government observes that restriction of banana cultivation to Crete and the efforts taken to extend the cultivation to the whole of the island is evidence that the best use is being made of the factors of production.

With regard to the question whether the Greek measures are ‘strictly necessary’ within the meaning of the second subparagraph of Article 65 (2) of the Act of Accession, the Greek Government admits that at present banana production in Greece is not very advanced from the point of view of quality and yield as compared with bananas imported into other Member States from nonmember countries. If importation of bananas were allowed during the transitional period provided for by Article 65 of the Act of Accession, it would lead to an unwanted drop in production and thus, on the one hand, the financial ruin of banana growers and, on the other, the abandonment of State financial programmes and investments.

Quantitative restrictions on banana imports are thus ‘strictly necessary’ measures to ensure the survival of the national organization. In consequence the import restrictions which Greece imposes fall within the spirit of Article 65 (2) of the Act of Accession.

The Court has declared lawful practices and measures which give some of the objectives of Article 39 of the EEC Treaty priority over others (judgment of 24 October 1973 in Case 5/73 Balkan Import-Export v Hauptzollamt Berlin-Packhof [1973] ECR 1091) even if it remains a principle of the common agricultural policy that all the objectives of Article 39 should ultimately be achieved. In the case of the national market in bananas, a corresponding order of priority of objectives has been, established and top priority has been given to the proper development of banana cultivation and a guarantee of a fair standard of living to banana growers without requiring unfair sacrifices from consumers since supplies reached the market at reasonable prices.

Both the Commission and the Greek Government discuss the fact that the Greek Council of State has already decided the legal question which is the subject of the present action and has accepted that the contested Greek measures are lawful.

B — Case 241/85

The Commission claims that Greece has undoubtedly infringed Article 3 (1) of the Lomé Convention for the purposes of which ‘quantitative restrictions’ and ‘measures having equivalent effect’ have the same meaning as in Article 30 of the EEC Treaty. Under the 1979 Act of Accession, Greece had to apply both Article 30 of the EEC Treaty and the Lomé Convention in its present form from 1 January 1981. It is thus beyond question that there is infringement.

Since quantitative restrictions and measures having equivalent effect cannot be imposed on the importation of bananas originating in and bananas coming from other Member States, it is Article 3 (1) of the Lomé Convention which is applicable in relation to bananas originating in ACP countries and not Article 6.

The Greek Government contends that in so far as there is a national organization of the market in bananas, Article 3 (1) of the Lomé Convention does not apply nor does Article 30 of the EEC Treaty where the importation of bananas originating in Member States of the EEC is prohibited. In the present case, since Article 6 of the Lomé Convention prevents ACP countries from enjoying more favourable treatment than Member States of the EEC, Greece is not infringing any provision since the existence of the national banana market requires that the present prohibition should be maintained in respect of imports from ACP countries as well.

With regard to imports from Member States, both the Commission and the Greek Government refer to their arguments in Case 194/85.

T. F. O'Higgins

Judge-Rapporteur

1 Language of the Case: Greek.