CELEX: 62005CJ0461
Failure of a Member State to fulfil obligations
Duty-free imports of military equipment

By its application, the Commission of the European Communities asks the Court to declare that, by refusing to calculate and
make payment of own resources which were not collected in the period from 1 January 1998 until 31 December 2002, in relation
to imports of military material which were exempted from customs duties, and by refusing to pay default interest arising from
the failure to pay those own resources to the Commission, the Kingdom of Denmark has failed to fulfil its obligations under,
respectively, Article 2 and Articles 9 to 11 of Council Regulation (EEC, Euratom) No 1552/89 of 29 May 1989 implementing Decision 88/376/EEC,
Euratom on the system of the Communities’ own resources (OJ 1989 L 155, p. 1), as amended by Council Regulation (EC, Euratom)
No 1355/96 of 8 July 1996 (OJ 1996 L 175, p. 3; ‘Regulation No 1552/89’), until 31 May 2000, and, after that date, the same
articles of Council Regulation (EC, Euratom) No 1150/2000 of 22 May 2000 implementing Decision 94/728/EC, Euratom on the system
of the Communities’ own resources (OJ 2000 L 130, p. 1).

Legal context

Community legislation
Article 2(1) of Council Decision 88/376/EEC, Euratom, of 24 June 1988 on the system of the Communities’ own resources (OJ
1988 L 185, p. 24) and of Council Decision 94/728/EC, Euratom, of 31 October 1994 on the system of the European Communities’
own resources (OJ 1994 L 293, p. 9), provides:
‘Revenue from the following shall constitute own resources entered in the budget of the Communities:
…
(b)      Common Customs Tariff duties and other duties established or to be established by the institutions of the Communities in respect
of trade with non-member countries and customs duties on products coming under the Treaty establishing the European Coal and
Steel Community;
...’
Article 20 of Council Regulation (EEC) No 2913/92 of 12 October 1992 establishing the Community Customs Code (OJ 1992 L 302,
p. 1, the ‘Community Customs code’), provides:
‘1.      Duties legally owed where a customs debt is incurred shall be based on the Customs Tariff of the European Communities.
…
3.      The Customs Tariff of the European Communities shall comprise:
(a)      the combined nomenclature of goods;
...
(c)      the rates and other items of charge normally applicable to goods covered by the combined nomenclature as regards:
–        customs duties
…
(d)      the preferential tariff measures contained in agreements which the Community has concluded with certain countries or groups
of countries and which provide for the granting of preferential tariff treatment;
(e)      preferential tariff measures adopted unilaterally by the Community in respect of certain countries, groups of countries or
territories;
(f)      autonomous suspensive measures providing for a reduction in or relief from import duties chargeable on certain goods;
(g)      other tariff measures provided for by other Community legislation.
...’
Article 217(1) of the Community Customs Code states:
‘Each and every amount of import duty or export duty resulting from a customs debt, hereinafter called “amount of duty”, shall
be calculated by the customs authorities as soon as they have the necessary particulars, and entered by those authorities
in the accounting records or on any other equivalent medium (entry in the accounts).
...’
In the context of making available to the Commission the Communities’ own resources, the Council of the European Union adopted
Regulation No 1552/89, applicable during the period at issue in this case until 30 May 2000. That regulation was replaced
as from 31 May 2000 by Regulation No 1150/2000 which consolidates Regulation No 1552/89 but does not alter its content.
Article 2 of Regulation No 1552/89 provides:
‘1.      For the purpose of applying this Regulation, the Community’s entitlement to the own resources referred to in Article 2(1)(a) and (b)
of Decision 88/376/EEC, Euratom shall be established as soon as the conditions provided for by the customs regulations have
been met concerning the entry of the entitlement in the accounts and the notification of the debtor.
1a.      The date of the establishment referred to in paragraph 1 shall be the date of entry in the accounting ledgers provided for
by the customs regulations.
…’
Article 9(1) of that regulation provides:
‘In accordance with the procedure laid down in Article 10, each Member State shall credit own resources to the account opened
in the name of the Commission with its Treasury or the body it has appointed.
This account shall be kept free of charge.’
Under Article 10(1) of that regulation:
‘After deduction of 10% by way of collection costs in accordance with Article 2(3) of Decision 88/376/EC, Euratom, entry of
the own resources referred to in Article 2(1)(a) and (b) of that Decision shall be made at the latest on the first working
day following the 19th day of the second month following the month during which the entitlement was established in accordance
with Article 2 of this Regulation.
...’
Article 11 of Regulation No 1552/89 provides:
‘Any delay in making the entry in the account referred to in Article 9(1) shall give rise to the payment of interest by the
Member State concerned at the interest rate applicable on the Member State’s money market on the due date for short-term public
financing operations, increased by two percentage points. This rate shall be increased by 0.25 of a percentage point for each
month of delay. The increased rate shall be applied to the entire period of delay.’
Under Article 22 of Regulation No 1150/2000:
‘Regulation (EEC, Euratom) No 1552/89 shall be repealed.
References to the said Regulation shall be construed as references to this Regulation and should be read in accordance with
the correlation table set out in Part A of the Annex.’
Thus, apart from the fact that Regulations Nos 1552/89 and 1150/2000 contain references to Decision 88/376 and Decision 94/728
respectively, Article 2 and Articles 9 to 11 of those two regulations are, in essence, identical.
The rate of 10% specified in Article 10(1) of Regulation No 1150/2000 was raised to 25% by Council Decision 2000/597/EC, Euratom,
of 29 September 2000 on the system of the European Communities’ own resources (OJ 2000 L 253, p. 42).
Recital (1) of the preamble to that decision states:
‘The European Council meeting in Berlin on 24 and 25 March 1999 concluded, inter alia, that the system of the Communities’
own resources should be equitable, transparent, cost-effective, simple and based on criteria which best express each Member
State’s ability to contribute.’
Council Regulation No 150/2003 of 21 January 2003 suspending import duties on certain weapons and military equipment (OJ 2003
L 25, p. 1), adopted on the basis of Article 26 EC, states in recital (5) of the preamble:
‘In order to take account of the protection of the military confidentiality of the Member States it is necessary to lay down
specific administrative procedures for the granting of the benefit of the suspension of duties. A declaration by the competent
authority of the Member State for whose forces the weapons or military equipment are destined, which could also be used as
a customs declaration as required by the Customs Code, would constitute an appropriate guarantee that these conditions are
fulfilled. The declaration should be given in the form of a certificate. It is appropriate to specify the form which such
certificates must take and to allow also the use of means of data processing techniques for the declaration.’
Article 1 of that regulation provides:
‘This Regulation lays down the conditions for the autonomous suspension of import duties on certain weapons and military equipment
imported by or on behalf of the authorities in charge of the military defence of the Member States from third countries.’
Article 3(2) of that regulation states:
‘Notwithstanding paragraph 1, for reasons of military confidentiality, the certificate and the imported goods may be submitted
to other authorities designated by the importing Member State for this purpose. In such cases the competent authority issuing
the certificate shall send before 31 January and 31 July of each year a summary report to the customs authorities of its Member
State on such imports. The report shall cover a period of 6 months immediately preceding the month on which the report has
to be submitted. It shall contain the number and issuing date of the certificates, the date of importation and the total value
and gross weight of the products imported with the certificates.’
Article 8 of Regulation No 150/2003 states that that regulation is to apply as from 1 January 2003.

Pre-litigation procedure
By letter of formal notice dated 20 December 2001, received on the following day, the Commission claimed that, by exempting
imports of specifically military material from customs duties, the Kingdom of Denmark had failed to fulfil its obligations
under Community law.
By letter of 20 December 2001 the Commission called upon the Kingdom of Denmark to calculate the amounts which had not been
collected in the budgetary years from 1998 onward and to make those amounts available to it before 31 March 2002. The Commission
also drew the Danish authorities’ attention to the fact that default interest would be payable from that date, pursuant to
Article 11 of Regulation No 1150/2000.
In its reply of 27 March 2002, the Kingdom of Denmark stated that, on the basis of Article 296 EC which gives to Member States
a wide discretion to determine what measures they consider necessary for the protection of the essential interests of their
security, it did not levy customs duties on imports of material intended for specifically military use.
By letter of 24 March 2003 the Commission renewed its original request in relation to imports of material for specifically
military purposes prior to 1 January 2003, since the period after that date was covered by Regulation No 150/2003.
In its reply of 7 May 2003 the Kingdom of Denmark maintained its position.
By letter of 17 October 2003 the Commission again gave formal notice to the Kingdom of Denmark that it should make the calculations
required for the determination of the amount of own resources which had not been paid to the Community because imports of
specifically military equipment had been exempted from customs duties in the financial years 1998 to 2002, that it should
make those resources available to the Commission and that it should pay the default interest which was payable pursuant to
Article 11 of Regulation No 1150/2000.
In its reply of 7 January 2004 the Kingdom of Denmark again stated its position that Article 296(1)(b) EC permitted it to
exempt imports of military material from customs duties in order to protect its essential security interests.
On 18 October 2004, after consideration of the Kingdom of Denmark’s reply, the Commission issued a reasoned opinion calling
upon that Member State to take the measures necessary to achieve compliance within a period of two months from the date of
receipt. The Member State in its reply of 3 March 2005 renewed and expanded on the abovementioned arguments.
Taking into account what the Kingdom of Denmark had said, the Commission considered that that Member State had not complied
with the reasoned opinion and brought the present action.
By order dated 5 May 2006, the President of the Court allowed the applications for leave to intervene of the Hellenic Republic,
the Portuguese Republic and the Republic of Finland in support of the forms of order sought by the Kingdom of Denmark.

The action

Arguments of the parties
The Commission claims that the Kingdom of Denmark is wrong to rely on Article 296 EC to justify the refusal to pay customs
duties, since the collection of such duties does not threaten the essential security interests of that Member State.
The Commission considers that measures which establish derogations or exceptions, such as in particular Article 296 EC, must
be interpreted strictly. Accordingly, the Member State concerned which claims that Article 296 applies and which proposes
to derogate from Article 20 of the Community Customs Code, where the general principle of the levying of duties as fixed under
Article 26 EC is stated, should demonstrate that it can satisfy all the conditions laid down in Article 296 EC.
The Commission also considers that the mere fact that products appear on the list established by Council Decision 255/58 of
15 April 1958, a list which defines the products to which Article 296(1)(b) EC may be applied, does not itself mean that that
provision is applicable, since a prerequisite of its application is that all the conditions specified therein are satisfied.
The Commission claims, consequently, that it is for the Kingdom of Denmark to provide specific and detailed evidence that
the collection of customs duties on the imports at issue in this case threatens essential interests of the security of the
Kingdom of Denmark.
The Commission also states that the Kingdom of Denmark has not informed it of the amount of the duties which it considers
to be payable, although that is a necessary condition of the Commission being able to verify that the condition of necessity
in Article 296(1)(b) EC is satisfied. Moreover, the Kingdom of Denmark has not stated in what respect its situation might
differ from that of other Member States which have collected such customs duties.
The Commission adds that Regulation No 150/2003 is applicable from 1 January 2003 and that, during discussions on its adoption,
the Commission declared that it was obliged to collect the customs duties at issue, in respect of preceding years, so that
no protection of legitimate expectations can be inferred from the adoption of that regulation. Moreover, that regulation is
based on Article 26 EC, and not on Article 296 EC.
As regards the obligation of military confidentiality provided for in Article 296(1)(a) EC, which is also relied on by the
Kingdom of Denmark, the Commission considers that argument rests on a confusion between Article 296(1)(a), which permits Member
States not to disclose certain information where that is contrary to the essential interests of their security, and Article 296(1)(b),
which allows Member States to take, subject to certain conditions, certain measures which they consider necessary for the
protection of those interests.
According to the Commission, the suspension of customs duties established by Regulation No 150/2003 in the military field
illustrates the fact that it is possible to establish special procedures for the customs handling of military equipment, with
or without payment of import duties, and that the customs procedures relating to military material constitute, therefore,
a separate issue from that of payment of customs duties. Moreover, under the Community Customs code, the Kingdom of Denmark
could organise the levying of customs duties in such a way as to safeguard the confidentiality of data relating to imports
of military material by assigning to certain customs offices specific powers in that field.
The Commission states, in that regard, that the failure of the Kingdom of Denmark to collect the customs duties in question
creates a disparity among the Member States in relation to their respective contributions to the Community budget. The effect
of that failure to collect is a reduction of Community traditional own resources which can be offset only by an increase in
the GNP resource, which is distributed between the Member States.
The Kingdom of Denmark considers that under Article 296(1)(b) EC Member States have a wide discretion in relation to measures
which they may take for the protection of the essential interests of their security and which are connected with the products
to which the provisions of Article 296(1)(b) EC apply. Accordingly, that article allows them to derogate from Article 26 EC
and from the Community Customs Code in the case of imports of equipment exclusively intended for military purposes where the
objective of those imports is the protection of the essential interests of the security of the Member State concerned, taking
into account the specific situation of that Member State.
The Kingdom of Denmark is also of the opinion that the adoption of Regulation No 150/2003 upheld the need to respect the security
interests of Member States and did not alter the previous state of the law, but clarified a pre-existing legal situation.
The fact that, before the entry into force of Regulation No 150/2003, there was no provision of Community law which allowed
a Member State to adopt, when needed, measures required to take account of its essential security interests when military
equipment was imported led the Kingdom of Denmark to consider that those interests were covered by Article 296 EC, because
of both the wording and the purpose of that article. Accordingly, the Kingdom of Denmark considered that it had no other choice
but to establish, at national level, an exemption of imports of such equipment from customs duties on the basis of Article 296 EC.
The Kingdom of Denmark considers that the levying of customs duties when military equipment is imported may constitute a threat
to the essential security interests of a Member State. First, the protection of a Member State’s security interests is closely
linked to the maintenance of its defence capacity, since the purchase of military material necessarily plays a part in the
maintenance of that capacity. Secondly, since the economic resources of a State which can be allocated to its defence are
limited, the levying of customs duties on imports of military material makes those imports that much more expensive and hinders
the capacity of the State to obtain them.
According to the Kingdom of Denmark, it is clear from recital (2) of the preamble to Regulation No 150/2003 and from the presentation
of the proposal for that regulation that the Commission recognised that there was a connection between the levying of customs
duties when military equipment was collected and the essential security interests of Member States. That being the case, the
Kingdom of Denmark considers that it is not appropriate for the Commission to require Member States to adduce additional evidence
in order to demonstrate that the levying of such duties constitutes a threat to their essential security interests.
The Kingdom of Denmark argues that it could not have complied with the Community customs procedure when the military equipment
at issue was imported without the risk of disclosing, within the Community, information which was essential for the security
of its national territory, including the kind of equipment imported, the constituents of that equipment and how that equipment
might be used. Accordingly, the obligation to observe a degree of confidentiality on the matter precludes the Kingdom of Denmark
from sending that information to the Commission and if the Kingdom of Denmark were unilaterally to disregard that obligation,
the pursuit of cooperation and trading relations in the military field with certain third countries might be jeopardised.
The Kingdom of Denmark considers that the confidentiality measures provided for by the Community Customs Code are not adequate
to meet the security and confidentiality requirements which a State is entitled to expect when the information concerned affects
its security. In those circumstances, a Member State may decline to pay customs duties when military equipment is imported
without thereby failing to fulfil its obligations under Community law.
The Kingdom of Denmark also considers that Member States have the power to establish in relation to duty‑free imports of military
equipment specific procedures which are designed solely to ensure that the equipment concerned is indeed military, and not
to determine the customs status of the goods in question or the tax rate for the calculation of an amount of customs duty
on the occasion of every import from third countries. The fact that, when Regulation No 150/2003 was being prepared, it was
necessary to define a legal basis for the introduction of such a specific procedure in that regulation is evidence that an
empowering provision for such a purpose was lacking in the Community Customs Code.
The Kingdom of Denmark contends that the fact that a Member State has exempted imports of military material from customs duties,
on the basis of Article 296 EC, does not necessarily infringe the principles of Community solidarity and good financial management.
Lastly, the Kingdom of Denmark considers that the fact that the Commission decided, as early as 1988, to submit a proposal
for a Council Regulation (EEC) relating to temporary suspensions of customs duties on certain armaments and military equipment
(OJ 1988 C 265, p. 9), is evidence that not only was the Commission not opposed to the solution of providing an exemption
in that area, but, on the contrary, by its proposal the Commission was merely clarifying the earlier law.
Moreover, it should also be observed, according to the Kingdom of Denmark, that the fact, on the one hand, that no further
negotiations were undertaken on this subject prior to the adoption of Regulation No 150/2003 and, on the other, that the Commission
chose not to continue the infringement proceedings which it had initiated against the Kingdom of Denmark in 1984 and 1985
in relation to the failure to collect customs duties on imports from third countries of materials which were for both civil
and military use, and did not commence such proceedings in relation to imports of specifically military equipment, could have
legitimately led the Danish authorities to consider that the Commission had accepted the existence of a derogation in that
area.

Findings of the Court
The Community Customs Code provides for the charging of customs duties on imports of products for military use, such as those
at issue, from third countries. There is no provision of the Community customs legislation which, in respect of the period
of imports at issue, namely from 1 January 1998 to 31 December 2002, provided for any specific exemption from customs duties
on imports of products of that type. Consequently, in respect of that period, nor was there any express exemption from the
obligation to make payment to the competent authorities of the duties which were payable, accompanied, as appropriate, by
payment of default interest.
It can moreover be inferred from the fact that Regulation No 150/2003 provided for the suspension of customs duties on certain
weapons and military equipment from 1 January 2003 that the Community legislature started from the assumption that an obligation
to pay those customs duties existed prior to that date.
The Kingdom of Denmark has not at any time denied the existence of the imports at issue during the period under consideration.
The Kingdom of Denmark has confined itself to challenging the Community’s entitlement to own resources while arguing that,
pursuant to Article 296 EC, the obligation to pay customs duties on armaments imported from third countries would cause serious
damage to its essential security interests.
According to the Court’s settled case-law, although it is for Member States to take the appropriate measures to ensure their
internal and external security, it does not follow that such measures are entirely outside the scope of Community law (see
Case C‑273/97
Sirdar
[1999] ECR I‑7403, paragraph 15, and Case C‑285/98
Kreil
[2000] ECR I‑69, paragraph 15). As the Court has already held, the only articles in which the Treaty expressly provides for
derogations applicable in situations which may affect public safety are Articles 30 EC, 39 EC, 46 EC, 58 EC, 64 EC, 296 EC
and 297 EC, which deal with exceptional and clearly defined cases. It cannot be inferred that the Treaty contains an inherent
general exception excluding all measures taken for reasons of public security from the scope of Community law. The recognition
of the existence of such an exception, regardless of the specific requirements laid down by the Treaty, would be liable to
impair the binding nature of Community law and its uniform application (see Case C‑186/01
Dory
[2003] ECR I‑2479, paragraph 31 and case-law there cited).
Furthermore, the derogations provided for in Articles 296 EC and 297 EC must, in accordance with settled case-law in respect
of derogations from fundamental freedoms (see, inter alia, Case C‑503/03
Commission
v
Spain
[2006] ECR I‑1097, paragraph 45; Case C‑490/04
Commission
v
Germany
[2007] ECR I‑6095, paragraph 86; and Case C‑141/07
Commission
v
Germany
[2008] ECR I‑6935, paragraph 50), be interpreted strictly.
As regards, more particularly, Article 296 EC, it must be observed that, although that Article refers to measures which a
Member State may consider necessary for the protection of the essential interests of its security or of information the disclosure
of which it considers contrary to those interests, that Article cannot however be read in such a way as to confer on Member
States a power to depart from the provisions of the Treaty based on no more than reliance on those interests.
Furthermore, in the area of value added tax, the Court declared in Case C‑414/97
Commission
v
Spain
[1999] ECR I‑5585 that there had been a failure to fulfil obligations on the ground that the Kingdom of Spain had not shown
that the exemption from that tax on imports and acquisitions of arms, ammunition and equipment exclusively for military use,
an exemption provided for by Spanish legislation, was justified, under Article 296(1)(b) EC, by the need to protect the essential
interests of the security of that Member State.
Consequently it is for the Member State which seeks to take advantage of Article 296 EC to prove that it is necessary to have
recourse to that derogation in order to protect its essential security interests.
In the light of those considerations, a Member State cannot be allowed to plead the increased cost of military material because
of the application of customs duties on imports of such material from third countries in order to avoid, at the expense of
other Member States who collect and pay the customs duties on such imports, the obligations which the principle of joint financing
of the Community budget imposes on it.
As regards the argument that the Community customs procedures are not capable of safeguarding the security of the Kingdom
of Denmark, in the light of the confidentiality requirements contained in agreements entered into with exporting States, it
must be stated, as correctly observed by the Commission, that the implementation of the Community customs system requires
the active involvement of Community and national officials, who are bound when necessary by an obligation of confidentiality,
when dealing with sensitive data, which is capable of protecting the essential security interests of Member States.
Furthermore, the level of specificity to be attained in the declarations which Member States must periodically complete and
send to the Commission is not such as to lead to damage to the interests of those States in respect of either security or
confidentiality.
In those circumstances, and in accordance with Article 10 EC which obliges Member States to facilitate the achievement of
the Commission’s task of ensuring compliance with the Treaty, Member States are obliged to make available to the Commission
the documents necessary to permit inspection to ensure that the transfer of the Community’s own resources is correct. However,
as the Advocate General stated in point 168 of his Opinion, such an obligation does not mean that Member States may not, on
a case-by-case basis and by way of exception, on the basis of Article 296 EC, either restrict the information sent to certain
parts of a document or withhold it completely.
In the light of the foregoing, the Kingdom of Denmark has not shown that the conditions necessary for the application of Article 296 EC
are satisfied.
It follows from the foregoing that, by refusing to calculate and make payment to the Commission of own resources which were
not collected in the period from 1 January 1998 until 31 December 2002, in relation to imports of military material which
were exempted from customs duties, and by refusing to pay default interest arising from the failure to pay those own resources
to the Commission, the Kingdom of Denmark has failed to fulfil its obligations under, respectively, Article 2 and Articles 9
to 11 of Regulation No 1552/89, until 31 May 2000, and, after that date, the same articles of Regulation No 1150/2000.

Costs
Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been
applied for in the successful party’s pleadings. Since the Commission has applied for costs to be awarded against the Kingdom
of Denmark and the latter has been unsuccessful, the Kingdom of Denmark must be ordered to pay the costs.
In accordance with Article 69(4) of the Rules of Procedure, the Hellenic Republic, the Portuguese Republic and the Republic
of Finland, who have intervened in the proceedings, are to bear their own costs.
On those grounds, the Court (Grand Chamber) hereby:
1.
Declares that, by refusing to calculate and make payment to the European Commission of own resources which were not collected
in the period from 1 January 1998 until 31 December 2002 in relation to imports of military material which were exempted from
customs duties, and by refusing to pay default interest arising from the failure to pay those own resources to the European
Commission, the Kingdom of Denmark has failed to fulfil its obligations under, respectively, Article 2 and Articles 9 to 11
of Council Regulation (EEC, Euratom) No 1552/89 of 29 May 1989 implementing Decision 88/376/EEC, Euratom on the system of
the Communities’ own resources, as amended by Council Regulation (EC, Euratom) No 1355/96 of 8 July 1996, until 31 May 2000,
and, after that date, the same articles of Council Regulation (EC, Euratom) No 1150/2000 of 22 May 2000 implementing Decision 94/728/EC,
Euratom on the system of the Communities’ own resources;
2.
Orders the Kingdom of Denmark to pay the costs;
3.
Orders the Hellenic Republic, the Portuguese Republic and the Republic of Finland to bear their own costs.
[Signatures]
*
Language of the case: Danish.