Report for the Hearing delivered in Joined Cases 326/86 and 66/88

I — Facts and procedure

1. On 25 April 1985 the Austrian authorities informed the Federal Republic of Germany that Austrian wine exported to the Federal Republic of Germany had been adulterated with diethylene glycol. On 10 July 1985 the Commission passed on to the other Member States the information at its disposal.

2. At a press conference on 27 August 1985 the Commission explained inter alia that traces of diethylene glycol had been discovered in certain Italian wines but in very small quantities and that it was awaiting the results of inquiries made by the Italian authorities.

3. The following day the Belgian daily newspaper Le Soir published an article under the headline ‘Piedmont wines adulterated with antifreeze’, which originated from a ‘source close to the Commission’. When Mr Francesconi complained that the names of the producers had not been revealed, Le Soir stated in a further article on 20 September 1985 that ‘three firms were involved, but the EEC refused to divulge their names’.

4. On 19 March 1986 úit Italian authorities informed the Commission that certain Italian wines were adulterated with methanol and the next day the Commission informed the other Member States. Since 2 March 1986 Italian wine adulterated with methanol had caused the death of a number of consumers. By a decree of 22 March 1986 the Italian Republic required all exported wines to be accompanied by a certificate of analysis.

5. On 25 March 1986 the applicant Francesconi referred to the articles which had appeared in 1985 in Le Soir and formally requested the Commission to publish in the press a complete list of the Piedmont wines involved. In its answer, on 23 April 1986, the Commission repeated the information given at the press conference on 27 August 1985. It stated that the probable source of the articles was a press release issued by the United Kingdom supervisory authorities on 15 August 1985 which contained a list of the contaminated wines. On grounds of professional secrecy, pursuant to Article 7 of Council Regulation No 359/79 of 5 February 1979 on direct cooperation between the bodies designated by Member States to verify compliance with Community and national provisions in the wine sector (Official Journal 1979, L 54, p. 136) it refused to publish the list requested.

6. Article 7 provides as follows:

‘The content of the exchange of information provided for in this regulation shall be covered by professional secrecy. It may not be communicated to any persons other than those who, by reason of their duties in the Member States or in the institutions of the Communities, are required to have knowledge thereof for the purposes of carrying out these duties.’

7. By applications received at the Court Registry on 23 December 1986 in Case 326/86 and 3 March 1988 in Case 66/88 20 dealers, restaurateurs or producers of Italian wine and 11 heirs or personal representatives of persons who had died after drinking adulterated wine brought two actions against the Commission. They claim that the Commission is non-contractually liable for the presence of adulterated wine on the market and therefore in Case 326/86 for the reduction in turnover following the deaths and in Case 66/88 for the deaths resulting from the consumption of adulterated wine.

8. 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 and assigned the cases to the Second Chamber. It nevertheless requested the applicants in Case 326/86 to confine their pleadings to the Commission's conduct which in their opinion caused the reduction in their turnover and asked them to specify the rule of Community law protecting the interests of traders which was allegedly infringed by the Commission's conduct.

9. By order of 13 December 1988, upon application in Case 66/88 and after hearing the parties in Case 326/86, the Court (Second Chamber) joined the cases for the purposes of the hearing and of judgment.

10. By order of 14 February 1989 the Court (Second Chamber), after hearing the views of the Advocate General, dismissed the application of Ital Product SPRL on formal grounds pursuant to Article 38(7) of the Rules of Procedure.

11. Pursuant to Article 95(4) of the Rules of Procedure, the Court (Second Chamber) referred Joined Cases 326/86 and 66/88 to the Court for the purposes of a decision on the application by B. Francesconi to intervene. By order of 15 March pursuant to Article 37 of the Statute of the Court of Justice of the EEC, the Court, after hearing the views of the Advocate General, rejected the application to intervene. By decision of 15 March 1989 the Court, after hearing the views of the Advocate General, assigned Joined Cases 326/86 and 66/88 to the Second Chamber.

II — Conclusions of the parties

1. The applicants claim the Court should: (1) declare the applications admissible and well founded; (2) order the Commission to pay each of the applicants a sum provisionally fixed (i) in Case 66/88 at ECU 658328 together with interest at the rate of 8% from the date of the death of each of the victims; (ii) in Case 326/86 provisional damages of ECU 10000 out of total damages provisionally estimated at ECU 100000 for each applicant, together with interest from 29 August 1985; appoint one or more experts instructed to determine, after hearing the parties, the full extent of the harm actually suffered by each of the applicants as a result of the Commission's alleged failure to act; alternatively, authorize the applicants to adduce evidence by all permissible means, including the hearing of witnesses, of the Commission's failure to act; alternatively, stay the proceedings in order to allow the applicants to bring actions before their national courts against certain Member States and obtain references to the Court for a preliminary ruling, whereupon application may be made for the joinder of those cases with the present case. (3) order the defendant to pay the costs.

2. The Commission contends that the Court should: (1) dismiss the application as unfounded; (2) order the applicants to pay the costs.

III — Submissions and arguments of the parties

1. The parties are agreed on the application of the principles according to which the Community can incur liability only if a number of conditions concerning the unlawfulness of the conduct alleged against the institutions, actual damage and the existence of a direct causal link between the wrongful act and the damage complained if are met.

(a) The unlawfiilness of the Commission's conduct

2. The applicants claim first of all that the Community may be liable for a wrongful act or omission consisting in the wrongful failure to fulfil an obligation or in the inadequate organization of its departments. The Commission is required to ensure that legislation is correctly implemented by Member States and to ensure that Community regulations are of an appropriate nature. The applicants refer to the general report of the Court of Auditors for the 1986 financial year (Official Journal 1987, C 336, p. 63 et seq.) and state that the Court of Auditors reviewed the information system relating to frauds and irregularities affecting the Guarantee Section of the European Agricultural Guidance and Guarantee Fund. As regards the wine market it stressed the extent of fraud, especially adulteration, and drew attention to the fact that the Commission had not been able to implement effective coordination of its directoratesgeneral concerned with fraud. The applicants consider that the Court of Auditors had already made similar observations in its reports for 1985 (Official Journal 1986, C 321) and for 1984 (Official Journal 1985, C 326) and that in spite of that the Commission has not changed its ways. The applicants then cite very lengthy passages from the Court of Auditors' Special Report No 4/87 on Community wine distillation measures, accompanied by the Commission's replies (Official Journal 1987, C 297, p. 14), which refers inter alia to the poor management and lack of monitoring by the Commission of the wine market. According to the report the Commission lacks detailed information because it relies almost exclusively upon information supplied by national representatives on the Management Committee. That practice leads to weaknesses, for example the inadequacy of the Commission's monitoring of observation of obligatory distillation measures and the absence of provisions in relation to appropriate analyses to detect adulterated wine. The Court of Auditors concluded inter alia that there were insufficient provisions in relation to sampling and laboratory analysis of wine destined for distillation at entry to the distillery and the existence of lacunae in relation to national monitoring procedures regarding distillation measures.

3. The applicants maintain that the Commission has failed to fulfil its obligation under Article 155 of the Treaty to monitor the application of: Council Regulation No 337/79 of 5 February 1979 on the common organization of the market in wine (Official Journal 1979, L 54, p. 1), as amended by Council Regulation No 1208/84 of 27 April 1984 (Official Journal 1984, L 115, p. 77); and Council Regulation No 2179/83 of 25 July 1983 laying down general rules for distillation operations involving wine and the byproducts of winemaking (Official Journal 1983, L 212, p. 1), as amended by Council Regulation No 2687/84 of 18 September 1984 (Official Journal 1984, L 255, p. 1). The applicants submit that in failing to take measures to check and to prevent fraud the Commission failed to fulfil its obligations to the European taxpayer with regard to the application of the Community budget and in particular Article 9 of Regulation No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy (Official Journal, English Special Edition 1970 (I), p. 218), the first subparagraph of paragraph 1 and the third subparagraph of paragraph 2 of which provide : The necessity of such steps was apparent after the discovery in Italy of a quantity of 20 million hectolitres of wine in stock at the end of the 1983/84 marketing year in addition to the 19 million hectolitres previously registered. The applicants express surprise that although warned of a substantial fraud by a press release by the British authorities on 15 August 1985 the Commission did not increase its surveillance of the market and did not initiate an inquiry pursuant to the third paragraph of Article 9(2) of Regulation No 729/70. Further, the applicants submit that the Commission was perfectly aware of the defects of the system which had been set up. On 29 December 1987 it submitted a proposal for a Council regulation laying down general rules on controls in the wine sector (COM(87) 694 final; Official Journal 1988, C 24, p. 8).

‘1. Member States shall make available to the Commission all information required for the proper working of the Fund and shall take all suitable measures to facilitate the supervision which the Commission may consider it necessary to undertake within the framework of the management of the Community financing, including inspections on the spot.

2. ... At the request of the Commission and with the agreement of the Member States, inspections or inquiries concerning trie transactions referred to in this Regulation shall be carried out by the competent authorities of that Member State. Officials of the Commission may also participate. ...’

4. Finally, the applicants submit that the Commission failed to fulfil its obligations with regard to the health and safety of consumers in that it knew or ought to have known that synthetic wines represent a danger for consumers. In the applicants' view the Commission ought the day after the press conference on 27 August 1985 to have adopted measures to prevent the sale of adulterated wines. No one would then have died, for among the seven Italian producers of wine adulterated with diethylene glycol were two producers who were subsequently also involved in the case of wine adulterated with methanol. The applicants request that those two producers should be heard by the Court as witnesses. In addition, the Commission ought immediately to have adopted appropriate measures to publish information which would have allowed consumers to identify adulterated wine, pursuant to Council Decision 84/133 of 2 March 1984 introducing a Community system for the rapid exchange of information on dangers arising from the use of consumer products (Official Journal 1984, L 70, p. 16).

5. The Commission observes that the applicants are lumping together the 1985 scandal over the Austrian wines adulterated with diethylene glycol and the 1986 scandal in relation to Italian wines adulterated with methanol. In fact the scandals are separate and there is no connection between them.

6. It denies the suggestion that the poor functioning of the obligatory distillation system led to the manufacture of adulterated wines, for no connection between the distillation system and the manufacture of artificial wines has been established. The various inquiries which have been conducted have not shown that the adulterated wines fraud was intended to obtain aid by presenting fraudulent products for intervention. The Commission states that according to the regulations in force at the time it was the sole responsibility of the Member States to monitor the application of the regulations. However, the Commission observes that the methods used were not adequate to the need to manage the wine market, owing to the extreme diversity of the organization, powers and staffing of the national bodies responsible for monitoring and also because of significant variations in the data provided by the Member States, including the difference of 20 million hectolitres in Italy at the end of the 1983/84 marketing year. To remedy the deficiencies observed the Commission adopted measures including Regulation No 2102/84 of 13 July 1984 (Official Journal 1984, L 194, p. 1) and Regulation No 2396/84 of 20 August 1984 (Official Journal 1984, L 224, p. 14). The Commission mentions other steps which it took but which were ultimately rejected by the Council. It was not until the adoption of Council Regulation No 1972/87 of 2 July 1987 amending Regulation No 822/87 on the common organization of the market in wine (Official Journal 1987, L 184, p. 26), especially Article 79, that the Commission was required to submit a proposal for a regulation to improve controls. On that basis the Commission submitted the aforementioned proposal of 29 December 1987. It therefore did not wait for the scandals of 1985 and 1986 before taking measures against adulterated wine frauds. The Commission adds that Article 9 of Regulation No 729/70 cannot provide a legal basis for monitoring by the Commission of the marketing and sale of all products since Article 9 concerns the procedure for clearing the accounts of the European Agricultural Guidance and Guarantee Fund.

7. With regard to its obligation under Article 155 of the EEC Treaty the Commission states that if it had considered that a Member State had not adopted the necessary measures it would have initiated the procedure provided for by Article 169 of the EEC Treaty.

8. The Commission states that it is primarily for the Member States to ensure the correct application of regulations. Article 27 of Regulation No 2179/83 and Article 64 of Regulation No 337/79 provide respectively as follows:

‘Article 27

1. Member States shall take the necessary measures to ensure that the provisions of this regulation are applied...’

‘Article 64

1. Member States shall take all necessary measures to ensure compliance with the Community provisions in the wine sector ... ’.

9. With regard to the claim based on the failure to provide sufficiently precise particulars to make possible the identification of the suspect products the Commission considers that it is for the Member States to take appropriate measures to inform consumers. The Commission confined itself to its role as a conduit for information and a coordinator pursuant to Regulation No 359/79 and the aforementioned Decision 84/133, which provides inter alia: Article 3 The competent authorities of a Member State shall inform the Commission without undue delay of any measures they may have taken following receipt of the information referred to in Article 1(3). On receipt of this information, the Commission shall in turn forward it to the competent authorities of the other Member States’. That procedure was followed with regard both to wine adulterated with diethylene glycol and to wine adulterated with methanol. It must be recalled that the particulars of the Italian wines adulterated with diethylene glycol were supplied by the British Government well before the Commission's press conference of 25 August 1985. As early as 16 August 1985 the British authorities had sent the Italian authorities a list mainly of the suspect Italian firms. With regard to wine adulterated with methanol the Commission was alerted only on 19 March 1986 by the Italian authorities, because the death on 2 March 1986 was not immediately attributed to methanol poisoning. The Commission considers that it should not take the place of the national authorities responsible for informing consumers.

‘Article 1

1. Any Member State which decides to take urgent steps to prevent, restrict or attach particular conditions to the marketing or use or the possible marketing or use on its territory of a product... because of the serious and immediate risk which that product... presents for the health ... shall immediately inform the Commission thereof...

2. ...

3. On receipt of this information, the Commission shall verify its conformity with the terms of this Decision and shall forward it to the competent authorities of the other Member States

10. With regard to the refusal to divulge the names of producers the Commission observes that it refrained from doing so in order to avoid divulging unnecessary information likely to harm the whole wine sector.

11. With regard to their first alternative claim the applicants requested that the following persons be called to give evidence: Henning Christophersen, Vice President and Member of the Commission with special responsibility for the budget, Carlo Ripa di Meana, Member of the Commission with special responsibility for culture, Piet Danken, Member of the European Parliament, Rapporteur for the European Parliament's Committee on Budgetary Control in respect of Frauds and Irregularities, Guy Guermeur, Member of the European Parliament, Permanent Rapporteur for the European Parliament's Committee on Budgetary Control in respect of Frauds and Irregularities, Filippo Maria Pandolfi, Minister for Agriculture of the Italian Republic, Giusseppe Zurlo, Under-Secretary of State for Health of the Italian Republic, Paolo Desana, Senator, President of the Comitato Nazionale per la Tutela delle Denominazioni di Origine dei Vini, Ezio Rivella, oenologist.

(b) Actual damage

12. The applicants in Case 66/86 consider that it cannot be denied that by losing a close relative who died as a result of poisoning from the consumption of adulterated wine they have suffered nonmaterial and material loss which they provisionally assess in the modest sum of ECU 658328. The Commission does not deny that actual damage was suffered.

13. The applicants in Case 326/86 state that it has been shown that Italian wine exports fell by more than 35% after the scandal concerning Italian wines adulterated with methanol in March 1986. They maintain that the measures adopted in Council Decision 86/603 of 8 December 1986 on the granting of national aid in the wine sector in Italy following the serious crisis affecting that sector as a result of the ‘methanol-adukerated wine’ affair (Official Journal 1986, L 352, p. 43) cannot compensate or fully make good the damage which the applicants have suffered as a result of the reduction in their turnover resulting from the Commission's misconduct. They submit that the compensation due to them cannot be determined with certainty at present and that experts must therefore be appointed to determine it.

14. The Commission does not deny that the entire wine sector in Italy has been adversely affected. However, it states that the applicants have not adduced evidenc? of the harm suffered by them individually and that the possible indirect effects suffered by them as a result of the adulterated wine affair are ordinary commercial risks and have no connection with the Commission's attitude.

(c) Causal link

15. The applicants submit that the lack of inspection by the Commission and its inadequate management and surveillance of the wine market was the direct cause of the damage alleged. The Commission's failure to take any appropriate measure for adequate inspection, an inquiry pursuant to Article 9 of Regulation No 729/70, or full information of consumers after the discovery of the 1985 scandal of wines adulterated with diethylene glycol was the direct cause of the death of the applicants' relatives in Case 66/88. By failing to act on the information it had received, the Commission allowed the production of synthetic wines for distillation to develop. Finally the death of consumers in Italy led to a legitimate mistrust of Italian wine products on the part of consumers, causing the reputation of Italian wines to decline and their sales to fall.

16. In answer, the Commission maintains that any damage the applicants suffered is primarily due to the misconduct of the traders who adulterated the wines. As regards the lack of inspection and public information the applicants should apply in the first place to the Italian Government and the media. In that respect there was no failure or omission on the part of the Commission. The Commission states that the necessary measures which must be taken jointly by the Community and the Member States to tighten inspections are already in hand.

17. To support their alternative claim the applicants refer to the Commission's refusal to accept liability for the lack of inspection in the wine sector. In those circumstances the only possibility of ensuring that the Court hear full argument on the respective liabilities at issue is to bring actions against the Member States before the national courts and obtain references for preliminary rulings which could be dealt with at the same time as the present case.

G.F. Mancini

Judge-Rapporteur

1 Language of the case: French.