Report for the Hearing in Case C-105/91

I — Facts and relevant legislation

A — The national legislation at issue

Greek Law No 363/1976, as amended by Law No 1676/1986, introduced a special consumer tax on private cars imported into or assembled in Greece.

The rate of the tax varied depending on the cubic capacity of the engine. By way of indication, it was 80% for cars of 1000 cm3, 166% for cars of 1600 cm3 and 400% for cars of over 2500 cm3.

Law No 1858 of 31 March 1989, which entered into force retroactively on 1 March 1989 and is entitled ‘Rules on the special consumer tax on private cars and other provisions’, reduced the rate of consumer tax on so-called ‘new technology’ or ‘anti-pollution technology’ cars satisfying the criteria set out in Joint Ministerial Decree No 12141 of 22 May 1989. Under Article 1 of Law No 1858/1989, cars of 1000 cm3 were taxed at a rate of 55%, cars of 1600 cm3 at 120% and cars of over 2500 cm3 at 370%. For the purposes of the application of those provisions, no distinction was made between Greek cars and imported cars.

Moreover, Article 2 of that law extended those reduced rates to new cars using old technology:

‘(a) which were manufactured by approved national car manufacturers coming under the system of customs surveillance (Law No 1573/1985); (b) which, before 28 February 1989: were the subject of an irrevocable documentary credit in respect of all or part of their value; were shipped or cleared the frontiers of their country of origin; reached the country; the importers of which acquired property in them abroad and have supporting evidence; which cars were imported without exchange formalities.’

Paragraph 2 provides as follows:

‘the provisions of subparagraphs (a) and (b) of the preceding paragraph shall be applicable until 31 August 1990 and 30 June 1989 respectively’.

Subsequently, Law No 1882 of 21 March 1990 further reduced the rates applicable to cars incorporating anti-pollution technology. Thus, under Article 37(2) and Article 42(1) of that law, cars of 1000 cm3 were taxed only at a rate of 50%, cars of 1600 cm3 at 70% and cars of over 2500 cm3 at 220%.

Like Law No 1858/1989, Article 42(4) of Law No 1882/1990 extended, on a transitional basis, those new rates to all cars incorporating traditional technology which were manufactured before 31 March 1990 by approved national car manufacturers. Under Article 42(5), the application of those rates was extended until 30 June 1991 as regards only cars made by national manufacturers of a cubic capacity of less than 1400 cm3 which fulfilled the conditions set out in Article 37(4)(b) of Law No 1882/1990.

Article 37(4)(b) reads as follows

‘4. For the purposes of this chapter, cars incorporating anti-pollution technology shall mean cars which, when cleared through customs, are new petrol-engined private cars which have obtained the “EEC type-approval certificate” as regards exhaust gas emissions in accordance with Directives 88/76/EEC, 88/436/EEC and 89/458/EEC, in particular cars whose exhaust gas emissions on manufacture with a view to EEC type-approval are equal to or less than the values set out below. (a) ... (b) cars fitted with engines whose cubic capacity is 1400 cm3 or more and less than or equal to 2000 cm3: Mass CO (g/test) Combined mass HC + NOx (g/test) 30 8 (c) ...’

As for imported cars incorporating traditional technology, under Article 42(6) of the new law, they were subjected to the reduced rates formerly laid down by Article 1 of Law No 1858/1989 for Greek cars incorporating anti-pollution technology, provided that they were imported before 27 February 1990 and cleared through customs before 30 April 1990.

B — The pre-litigation procedure

By letter dated 14 December 1989, the Commission informed the Greek Government that it considered that Article 2 of Law No 1858/1989 was manifestly discriminatory against imported cars and that consequently it was contrary to the first paragraph of Article 95 of the Treaty. Under that provision, in order to qualify for the reduced rates, imported cars incorporating traditional technology had to satisfy the anti-pollution criteria laid down by the new law, whereas Greek-made cars incorporating traditional technology were exempt from having to satisfy those criteria. The Commission observed that, in the case of cars of a cubic capacity of 1400 cm3, the difference between the full and the reduced rates was in excess of 40% of the price before tax.

Pointing out that there had been no reply to its letter of 12 July 1989, the Commission put the Greek Government on notice to submit its observations within one month. It nevertheless reserved the right to re-examine the provisions at issue in the light of Article 92 of the Treaty.

Since the Greek Government did not react to that formal notice, the Commission delivered a reasoned opinion on 16 March 1990.

In that opinion, it repeated the complaint set out in the formal notice: since it provided that Greek-made cars incorporating traditional technology qualified for reduced rates until 31 August 1990, but not imported cars incorporating traditional technology, Article 2 of Law No 1858/1989 infringed Article 95 of the Treaty.

In addition, the Commission observed that the anti-pollution criteria laid down by the Greek legislation were stricter than those prescribed by the Community legislation in force, in particular Council Directive 88/76/EEC of 3 December 1987 amending Directive 70/220/EEC on the approximation of the laws of the Member States relating to measures to be taken against air pollution by gases from engines of motor vehicles (OJ 1988, L 36, p. 1). Consequently, imported cars capable of qualifying for the reduced rates constituted exceptions on the European market, which had the effect of increasing still further the scale of the infringement.

The Commission gave the Greek Government one month to comply with the reasoned opinion.

On 10 May 1990, the Greek Government informed the Commission that certain provisions of Law No 1858/1989 had been amended or repealed by Law No 1882 of 21 March 1990.

On 2 April 1991, the Commission brought this action.

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. However, it decided to put two questions to the Greek Government and two to the Commission. The answers to those questions are set out in Section IV of this report.

II — Forms of order sought by the parties

The Commission claims that the Court should:

declare that, by applying higher rates of special consumer tax to private cars incorporating traditional technology imported from other Member States than are applied to private cars incorporating traditional technology produced or assembled in Greece, the Hellenic Republic has failed to fulfil its obligations under Article 95 of the EEC Treaty;

order the Hellenic Republic to pay the costs.

The Hellenic Republic claims that the Court should:

dismiss the application of the Commission of the European Communities in its entirety;

order the Commission to pay the costs.

III — Pleas and arguments of the parties

The parties' arguments raise two issues: one procedural, the other substantive.

A — Procedure

In the parts of its application relating to the facts and the law, the Commission referred both to Law No 1882/90 and to Law No 1858/1989. The latter law was mentioned neither in its formal letter nor in the reasoned opinion. As for the complaint, it contains no reference to particular laws.

The Commission considers that that manner of proceeding is completely consistent with Article 169 of the Treaty. Since, as regards either law, the complaint related to the difference in the rates applicable to imported and Greek-assembled cars incorporating traditional technology, the change in the law did not mean that it had to re-open the pre-litigation procedure. Otherwise it would be sufficient for the Member States to make various successive amendments to their legislation inconsistently with Community law in order to prolong indefinitely the pre-litigation procedure in proceedings for failure to fulfil obligations.

The Commission also maintains that, in general, the application was set out in sufficiently precise terms: the provisions of Laws Nos 1858/1989 and 1882/1990 which, in its view, constitute a failure to fulfil obligations were identified specifically in the parts of the application relating to the facts and the law.

Lastly, the Commission observes that, even after Law No 1882/1990 was passed, Law No 1858/1989 continued to have effects.

‘Under Article 42(6) of Law 1882/1990, “new private cars incorporating traditional technology which were imported before 27 February 1990 shall be subject to the special consumer tax referred to in Article 1 of Law No 1858/1989 provided that they are cleared through customs before 30 April 1990”, whereas, in accordance with Article 2 of Law No 1858/1989, Greek-manufactured cars are subject to the same rates until 31 August 1990. Consequently, the period from 1 May 1990 until 31 August 1990 is not covered and the provisions of Law No 1858/1989 which discriminate against imported cars continue to be applicable during that period.’

Moreover, since it does not have retroactive effect, Law No 1882/1990 does not affect cars imported in the past, from February 1989 until its entry into force.

The Greek Government considers on the contrary that the Commission has infringed Article 169 of the Treaty. In so far as it refers in its application to Law No 1882/1990, yet in the pre-litigation phase its criticism was levelled solely against Law No 1858/1989, the Commission enlarged the scope of its application. Since the fact situations to which those two laws correspond are different, it should have recommenced the pre-litigation phase of the procedure as regards Law No 1882/1990, failing which it infringed the fundamental rights underlying an action for failure to fulfil obligations. In that connection, the Greek Government points out that, according to the Court's case-law, an action based on Article 169 of the Treaty can be based only on pleas identical to those set out in the reasoned opinion (see the judgments in Case 211/88 Commission v Denmark [1982] ECR 4547, Case 124/81 Commission v United Kingdom [1983] ECR 203, Case C-217/88 Commission v Germany [1990] ECR I-2879 and in Case C-347/88 Commission v Greece [1990] ECR I-4747). It maintains that the Commission did not mention that case-law.

In general, the Greek Government complains that the Commission drafted its application imprecisely. It is not possible to determine from the application whether the action is brought against the provisions of Law No 1858/1989 or against those of Law No 1882/1990.

Lastly, it claims that the Commission impliedly acknowledged in its reply that it had enlarged the scope of the action and thereby infringed Article 169 of the Treaty.

For those reasons, the application should be dismissed.

B — The substantive issue

In the first place, the Commission considers that Article 2 of Law No 1858/1989 and Article 42(4), (5) and (6) of Law No 1882/1990 are contrary to the first paragraph of Article 95 of the Treaty. Under Law No 1858/1989, cars incorporating traditional technology made in Greece before 31 August 1990 benefited by the reduced rates applicable to cars incorporating anti-pollution technology whilst imported cars incorporating the same technology remained subject to the full rates laid down by Laws Nos 363/1976 and 1676/1986. Law No 1882/1990 perpetuated that discrimination: whereas imported cars incorporating traditional technology were then taxed at the reduced rates formerly laid down by Law No 1858/1989 for cars incorporating new technology, Greek-made cars incorporating traditional technology benefited by the new, more advantageous rates laid down by Law No 1882/1990 for cars incorporating antipollution technology.

The Commission maintains that the fact that Greek car production covers only 10% of aggregate demand and Greek cars are not exported is not capable of eliminating the infringement. On the one hand, Article 95 prohibits any tax treatment which is unfavourable to imported products regardless of the scale of the impact on intra-Community trade. On the other hand, that provision makes no reference to exports.

Secondly, the Commission considers that the preferential treatment applicable to Greek-made cars incorporating traditional technology is not justified on any objective ground. In response to the Greek Government's claim that ‘the less competitive position of Greek products in relation to imported products ... necessitated State intervention’, the Commission argues that, far from justifying the discrimination, that statement constitutes an admission that the provisions at issue infringe Article 95 of the Treaty in so far as that article provides that the Member States' domestic taxation must be completely neutral from the point of view of competition between domestic and imported products. From this angle, the Greek legislation could even be regarded as also constituting an infringement of the third paragraph of Article 93 of the Treaty.

For the rest, the Commission considers it irrelevant that the provisions of Laws Nos 1858/1989 and 1882/1990, which lay down reduced rates for cars incorporating antipollution technology, pursue environmental aims. In that connection, it points out that its complaint relates, not to the provisions concerning cars incorporating anti-pollution technology, but to those relating to Greek-made cars incorporating traditional technology-

The Greek Government considers for its part that the contested provisions of Laws Nos 1858/1989 and 1882/1990 are perfectly consistent with Article 95 of the Treaty.

In the first place, it maintains that the criteria laid down by the Court (see the judgments in Case 168/78 Commission v France [1980] ECR 347, in Case 169/78 Commission v Italy [1980] ECR 385 and in Case 171/78 Commission v Denmark [1980] ECR 447) in order to establish an infringement of Article 95 have not been fulfilled: the Greek legislation at issue does not impede the free movement of goods under normal conditions of competition and does not constitute a form of protection of domestic products. Having regard to the fact that Greek-manufactured cars do not exceed 10% of aggregate demand, the Commission was not capable of showing, in accordance with the rule set out by the Court in Case C-132/88 Commission v Greece [1990] ECR I-1567, that the rules at issue were such as to deflect the consumer from buying imported cars to the benefit of domestic cars.

The Greek Government further observes that the reduced rates also benefit certain imported cars incorporating traditional technology. This is the case with cars imported by their owners using their own means without exchange formalities for which an irrevocable documentary credit of 20% has been opened. The number of imported cars which have benefited by that reduction exceeds the number of Greek-manufactured cars.

Lastly, the Greek Government seeks to show that the discrimination, if discrimination there is, is based on objective reasons.

In general, the tax reductions introduced by Laws Nos 1858/1989 and 1882/1990 are designed to deal with the environmental problems arising essentially in urban centres: it is a question of encouraging the renewal of the cars in use in Greece and adapting them to the new Community rules on exhaust gas emission by introducing tax incentives.

As for the transitional provisions extending the preferential rates to cars incorporating traditional technology manufactured in Greece up until 31 August 1990 — the only cars concerned by this action —, these constitute State intervention intended to offset the competitive disadvantage suffered by Greek-made cars as against imported cars. More specifically, they are intended to enable the Greek car industry to respond to the new requirements imposed by the Community environmental rules. In this area, the Greek car industry, which is underdeveloped, is behindhand compared with industry in other Member States.

Lastly, the Greek Government informs the Court that Article 2 of Law No 1858/1989 has ceased to have any effects since 31 August 1990. As for Article 42 of Law No 1882/1990, the Greek Government states that it has no longer been applicable since April 1991. It appeared on that date that the Greek car industry had adapted to the new anti-pollution rules. However, in its rejoinder the Greek Government stated that the contested provisions of Law No 1882/1990 had effect until 30 June 1991.

IV — Answers to the questions put by the Court

The Court put four questions to the parties: two to the Greek Government and two to the Commission.

A — Questions put to the Greek Government

First, the Court asked the Greek Government to state precisely the date on which Law No 1882/1990 ceased to have any effects.

The Greek Government stated in reply that, formally, Law No 1882/1990 ceased to have any effects on 30 June 1991. However, in fact it had no longer been applied since 30 April 1991. At that date, it appeared that the Greek car industry had adapted to the stricter anti-pollution standards laid down by Article 37 of that law. In support of its statements, the Greek Government annexed to its answer a letter dated 11 May 1992 from the Directorate General of Customs of the Ministry of Finance, a letter dated 30 April 1991 from a major car manufacturer and a certificate issued on 26 April 1991 by the competent directorate of the Ministry of Transport and Communications.

Secondly, the Court asked the Greek Government to state at what time it had first reacted to the Commission's letters. In Section B of its defence, the Greek Government stated that it had given the reasons for the provisions laid down by Law No 1858/1989 ‘at the start of the procedure under Article 169 for failure to comply with obligations’.

The Greek Government replied that the Ministry of Industry, Energy and Technology replied to the Commission's first letter dated 12 July 1989 by letter No B.20518/3038 of 9 October 1989. As proof, it appended to its reply both the letter of 9 October 1989 and the letter of 11 May 1992 from the Ministry of Finance to which it referred in its answer to the first question.

The Greek Government added that the Commission's new letter of 14 December 1989, which was received by the aforesaid directorate of the Ministry of Finance, was replied to in a letter dated 9 January 1990, that is to say, within one-month period prescribed by the Commission. That letter is also appended to the Greek Government's answer.

B — Questions put to the Commission

First, the Court asked the Commission if it could confirm that its complaint related to Article 2 of Law No 1858/1989, on the one hand, and to Article 42(4) and (6) of Law No 1882/1990, on the other.

The Commission stated in reply that its complaints related to the system for taxing cars sold in Greece, as laid down by the provisions of Article 2 of Law No 1858/1989 and Article 42(4), (5) and (6) of Law No 1882/1990 in conjunction with the other relevant provisions of those laws and of Law No 363/1976, as amended by Law No 1676/1986.

Secondly, the Court asked the Commission to explain the third sentence of section 3 of its reply, which reads as follows:

‘Consequently, the period 1 May 1990 to 31 August 1990 is not covered and the provisions discriminating against imported cars contained in Law No 1858/1989 continued to be applicable during that period’.

The Commission stated in reply that Law No 1858/1989 was mentioned in error in that sentence; in fact Law No 363/1976, as amended by Law No 1676/1986, which had to be read in conjunction with Laws Nos 1858/1989 and 1882/1990, were meant.

It also gave a number of clarifications concerning the taxation system at issue.

In the first place, it explained that under Law No 1858/1989 a distinction had to be made between four classes of cars:

‘(a) Greek-made or imported cars incorporating anti-pollution technology subject to the reduced rates laid down in Law No 1858/1989; (b) Greek-made cars incorporating conventional technology which were made before 31 August 1990 and are subject, regardless of the date of sale, to the reduced rates laid down by Law No 1858/1989 [Article 2(1 )(a)]; (c) imported cars incorporating conventional technology which were cleared through customs before 30 June 1989, provided that they fulfilled the aforementioned conditions before 28 February 1989. Such cars are subject to the reduced rates laid down in Law No 1858/1989; (d) imported cars incorporating conventional technology which were cleared through customs after 30 June 1989 or were cleared through customs before that date but do not fulfil the requirements of Article 2(1 )(b) of Law No 1858/1989 before 28 February 1989. Those cars are subject to the normal, high rates laid down by Law No 363/1976, as amended by Law No 1676/1986.’

Subsequently, Articles 1 and 2 of Law No 1858/1989 were replaced by Articles 37 and 42 of Law No 1882/1990, which entered into force on 23 March 1990. Cars sold in Greece could then be classed in the following categories:

‘(a) Greek-made or imported cars incorporating anti-pollution technology are subject to the new, very advantageous rates laid down by Article 37 of Law No 1882/1990; (b) Greek-made cars incorporating conventional technology. Under the Law of 1990, a distinction has to be made between two subcategories: cars manufactured before 31 August are subject to the new, very advantageous rates laid down by Article 37 of Law No 1882/1990 (regardless of their cubic capacity) (Article 42(4)); cars manufactured after 31 August are also subject until 30 June 1991 to the new, very advantageous rates laid down by Article 37 of Law No 1882/1990 in so far as their cubic capacity is less than 1400 cm3 and they fulfil the requirements laid down in Article 37(4)(b) (Article 42(5)); (c) if imported cars incorporating conventional technology were brought into the country before 27 February 1990 and cleared through customs before 30 April 1990, they are subject to the old reduced rates laid down by Article 1 of Law No 1858/1989 (Article 47(6)) (and not to the new, more advantageous rates laid down by Article 37 of Law No 1882/1990 as is the case with Greek-made cars incorporating conventional technology which were manufactured during that period); (d) imported cars incorporating conventional technology which were brought into the country after 27 February 1990 (irrespective of the date on which they were cleared through customs); or, although they were brought into the country before that date, were cleared through customs before 30 April 1990, are subject to the normal, high rates laid down by Law No 363/1976, as amended by Law No 1676/1986.’

‘Comparison of those categories, as laid down successively by Laws Nos 1858/1989 and 1882/1990, clearly shows that in fact the latter law conserved and increased the discrimination as between Greek-made and imported cars incorporating conventional technology as regards the rates of special consumer tax imposed on them. Thus, a Greek-made private car incorporating conventional technology which was manufactured before 31 August 1990 enjoys advantageous treatment, since it is subject to the new rates laid down by Law No 1882/1990, irrespective of the date on which it is sold, that is to say, even if it is sold after 31 August 1990. On contrast, an imported car incorporating conventional technology, regardless of the date on which it was made, is in general subject to the normal, very high rates laid down by Law No 363/1976, as amended by Law No 1676/1986. Article 42(6) of Law No 1882/1990 provides for an exception only for cars which were brought into the country before 27 February 1990. That exception, however, is limited and much less advantageous than in the case of Greek-made cars for the following reasons: it affects only cars brought into the country before 27 February 1990 and not cars shipped before that date or cars shipped between 27 February and 30 August 1990, to which that exception does not apply; The Commission continues as follows: in order for the derogation to apply, the cars must have been cleared through customs before 30 April 1990, with the result that imported cars cleared through customs as from 1 May 1990 are subject, even if they were imported before 27 February 1990, to the normal, high rates laid down by Law No 363/1976, as amended by Law No 1676/1986; under that exception, cars brought into the country which fulfil the relevant requirements of Article 42(6) of Law No 1882/1990, unlike Greek-made cars, are not subject to the rates laid down by Law No 1882/1990, but to the less advantageous rates laid down by Article 1 of Law No 1858/1989, which therefore continue to apply to such cars under Article 42(7) of Law No 1882/1990. It is therefore manifest that imported cars are subject to discriminatory tax treatment, since, depending on the date on which such cars were brought into the country and cleared through customs, they are subject either to the high rates laid down by Law No 363/1976, as amended by Law No 1676/1986, or, for a transitional period, to the reduced, but less advantageous rates laid down by Law No 1858/1989, whereas Greek-made cars manufactured before 31 August 1990 are subject to the more advantageous rates laid down by Law No 1882/1990. In view of those factors, it is clear that, during the period 1 May to 31 August 1990, it is the rates laid down by Law No 363/1976, as amended by Law No 1676/1986, which apply to imported cars ...’.

The Commission adds that the discriminatory tax treatment of imported cars is not confined to the period 1 May to 31 August 1990.

‘This discriminatory treatment also applied before that period, since cars incorporating conventional technology which were imported and cleared through customs before 30 April 1990 are subject to the rates laid down by Law No 1858/1989 whilst similar Greek-made cars were subject in the same period to the rates laid down by Law No 1882/1990. However, the discriminatory treatment of imported cars incorporating conventional technology was extended even beyond 31 August 1990, since, whilst the imported cars in question were subject to the rates laid down by Law No 363/1976, as amended by Law No 1676/1986, similar Greek-made cars enjoyed doubly advantageous treatment, namely: on the one hand, such cars which were manufactured before 31 August 1990 are subject to the much lower rates laid down by Law No 1882/1990, even if they were sold to consumers after 31 August 1990, in other words, still today; on the other hand, cars incorporating conventional technology which were manufactured after 31 August 1990, whose cubic capacity is less than 1400cm3 and which fulfil the requirements of Article 37(4)(b) of Law No 1882/1990 also qualify for the advantageous rates laid down by that law. There is no corresponding provision for similar imported cars.’

In order to show that there is immediate interest in a declaration that the infringement in question has taken place, the Commission also appended to its answer a complaint showing that an action has been brought in the Greek courts concerning the system of the special tax referred to in Article 1 of Law No 1858/1989.

R. Joliet

Judge-Rapporteur

1 Language of the case: Greek.