61969C0010
OPINION OF MR ADVOCATE-GENERAL ROEMER
DELIVERED ON 24 JUNE 1969 (
1
)
Mr President,
Members of the Court,
The facts of the case in which we are today considering the reference for a preliminary ruling are as follows:
The plaintiff in the main action, a Belgian commercial company, sells office machines and ancillary equipment. After many years of business relationships, going back to the year 1937, between the former sole owner of the plaintiff undertaking and the Marchant Calculating Machine Company, established in the USA, and after the amalgamation of this company with the Smith Corona company to form the Smith Corona Marchant Corporation in New York, there was concluded on 1 July 1961 a new written agreement between the plaintiff and a Swiss subsidiary of the said American firm, SA Smith Corona Marchant International of Lausanne. Under this contract the plaintiff was granted the sole rights of sale and distribution in Belgium and Luxembourg of certain calculating machines and typewriters manufactured or distributed by the other party to the contract. If these products were supplied either by the other party to the contract or by one of its subsidiaries or other sole concessionnaires into the territory over which the plaintiff enjoyed the concession, the plaintiff had the right to claim commission from the suppliers. The plaintiff undertook to build up a distribution network, to organize an after-sales service, to give a guarantee and to maintain stocks. The contract was notified to the Commission on behalf of both parties on 31 January 1963, that is to say, within the time-limit laid down in Article 5(1) of Regulation No 17.
When Smith Corona Marchant International of Lausanne began also to manufacture or distribute electric copying machines, it also granted the exclusive distributorship of these in Belgium and Luxembourg to the plaintiff. This occurred without any addition to the list in which the products dealt with by the agreement of 1961 were enumerated. Nor was any supplementary notification made to the Commission.
By virtue of a clause providing for notice contained in the contract of 1 July 1961, the Swiss company, on 6 October 1966, put an end to the contractual relationship — observing the contractual period of notice of 90 days — in so far as it related to electric copying machines; the rest of the agreement remained unaffected.
Portelange, taking the view that the period of notice mentioned was too short, and that the termination of the contractual relationship contravened the Belgian Law of 27 July 1961 on unilateral repudiation of sole distributorship agreements, commenced an action on 4 and 5 September 1967 before the Tribunal de Commerce, Brussels. The action was directed not only against SA Smith Corona Marchant International of Lausanne, but also against three other companies (with registered offices in Frankfurt, New York and Brussels) which enjoy a dependent relationship (as parent and subsidiary, or as affiliated companies) between themselves and with the defendant. These companies, in the contention of the plaintiff, participated in the fulfilment of the contract and are on that account bound by obligations to the plaintiff. The object of the action is to establish that the sole distributorship contract concluded with the plaintiff was terminated without adequate notice and without payment of compensation. The plaintiff also claims various damages from the defendant, and the return of machines and other products. Furthermore, in the plaintiffs statement of claim there are other claims which do not concern the present proceedings. They are based upon allegations of unfair competition, and claim that the defendant should be ordered to deliver spare parts, a declaration that certain contractual prohibitions on competition should be regarded as lifted in view of the defendant's misconduct, and that the defendant should be ordered to pay damages. The last-mentioned claims relate to the plaintiff's contention that Smith Corona Marchant Belgium, after the abovementioned termination of the contractual relationship, built up its own sales organization in Belgium. It is also based on transactions which took place at this time between the parties and which — in the plaintiff's view — gave rise to certain obligations on the part of the defendant (for the supply of spare parts and other products and to refrain from supplying the plaintiff's customers).
The important point for us is that the defendant pleaded, in opposition to the principal claim for damages for breach of contract, that the agreement relied upon by the plaintiff is void as amounting to an infringement of Article 85(1) of the EEC Treaty. The plaintiff sought to meet this argument by contending inter alia that Article 85(1) has no application since the agreement did not contain any closed sole distributorship system. In any case, it was notified to the Commission in due time, which — in accordance with the judgment of the Court of Justice in the Bosch case — establishes its provisional validity.
The lastmentioned contention seems to the Tribunal de Commerce clearly relevant. In view of the extensive discussion on the question how, in detail, provisional validity is to be understood, the Brussels court did not think it appropriate to resolve this problem itself. By an interlocutory judgment dated 18 February 1969, it suspended the proceedings and referred to the Court of Justice, under the second paragraph of Article 177 of the EEC Treaty, the following question:
‘How are Article 85 of the EEC Treaty and the implementing regulations adopted under it to be interpreted as regards the effects of the provisional validity acknowledged in the case of agreements which have been notified in due time to the Commission of the European Communities, before the commencement by the latter of the procedure provided for in Article 9 of Regulation No 17 of the Council of the EEC of 6 February 1962?’ At the same time the Court granted the plaintiff permission — though the matter is not of any concern to us — to adduce evidence in support of its allegations of unfair behaviour on the part of the defendant.
The plaintiff in the main action and the Commission of the European Communities have submitted written observations on the request for interpretation. The defendant in the main action also took part in the oral procedure.
I must now consider what answer the Court should give to the Tribunal de Commerce, Brussels.
Legal consideration
1.
First, it seems that the Commission is correct in its observation that the decision of the case which the court referring the question has to decide does not really raise the problem of the provisional validity of duly-notified old agreements. The Commission devotes two-thirds of its written observations to explaining the reasons for this view.
The question also arises, therefore, whether in the present case the question referred to the Court is relevant to the decision. In its previous decisions the Court has always emphatically refused to examine this question; only in its judgment in Case 13/68 (Rec. 1968, p. 672) is there — as I have recently pointed out — an indication of readiness to abandon this standpoint in certain circumstances. The decision mentioned refers to a situation where it is manifestly erroneous to invoke the provision whose interpretation is requested, and recognizes that in such a situation the Court could refuse to give the interpretation requested.
The present case appears to me particularly suited for the application of this principle. The test of relevance to a decision may depend upon facts furnished by the referring court itself, or on facts adduced by the Commission (concerning which the Commission has especially reliable knowledge). Moreover, the test requires no consideration of national law, which would be an intrusion into a domain which in principle is closed to us, but must be applied solely on the basis of considerations derived from Community law.
The essential starting-point for the plaintiff's argument, and for the view of the referring court, is — as I have already mentioned — the well-known Bosch judgment, that is the decision in Case 13/61 [1962] E.C.R. 45. In this judgment it is stated inter alia:
‘Agreements and decisions in existence at the date of entry into force of this regulation [namely Regulation No 17] are not annulled automatically by the mere fact that they fall within the ambit of Article 85(1). Such agreements and decisions must be considered valid in so far as they fall within Article 5(2) of the regulation; they must be considered as provisionally valid when, although not excepted by operation of that provision, they are notified in time to the Commission in accordance with Article 5(1) of the said regulation.»
If further clarification is to be given to this — or, more specifically, to the concept of provisional validity (which, as is well known, many consider desirable), two things are quite clear from the dictum cited. The agreement in question must be a so-called old agreement, i.e. an agreement already in effect at the time of entry into force of Regulation No 17 (on 13 March 1962), and its notification to the Commission must have been made in due time. Notification could (under Article 5(2) of Regulation No 17) only be dispensed with in the cases specified in Article 4(2), that is to say, in circumstances which, in the proceedings before the Brussels court, both in its view and in the view of the Commission, are manifestly not present.
We know from the statement of facts in the present case that a sole distribution contract was concluded between the plaintiff and one of the defendants in 1961 and that this was notified to the Commission in due time (viz. on 31 January 1963). However, it is important to note that in the agreement a formula was employed whereby the products to which the agreement relates were to be precisely specified. In 1961 these were only calculating machines and typewriters of certain types. Later, it is said, the list of goods was extended by an understanding, but without any alteration of the wording of the contract: the plaintiff also acquired the sole distribution right for electric copying machines. When that occurred does not seem to be entirely clear. The judgment referring the question does not mention any date. The Commission thought it could be gathered from the procedural documents that the extension occurred only after 31 January 1963, whilst the plaintiff in the course of the oral part of the proceedings mentioned that as early as October 1962 it had received deliveries of electric copying machines. This point, which is for the national court to clarify, we may leave open. The only point material for Community law is that the extension of the original agreement must be regarded as a supplementary contract which similarly ought to have been notified. In the view of the Commission, which I consider correct, the supplementary agreement requires a separate evaluation from the point of view of competition law, since it cannot be asserted that the products dealt with therein formed a uniform market with the products mentioned in the original agreement. Certainly it is immediately apparent that the markets for typewriters and calculating machines, on the one hand, and for electric copying machines, on the other hand, do not exactly coincide. It will not, therefore, be possible for the Commission, on the basis of the first agreement notified, to determine the admissibility of an exemption in relation to the subsequent supplementary agreement. Yet it is precisely with this supplementary agreement that the court referring the case is concerned, for it is only that agreement which was repudiated by the defendant and only upon its termination that the plaintiff bases its claims for damages.
The conclusion drawn by the Commission, therefore, seems compelling: on the basis of the facts which alone are of concern to us, it probably cannot be said that there is any question of an old agreement in effect at the time of entry into force of Regulation No 17. Certainly, however, there was no notification of this agreement, since the notification, for which in Form B of Commission Regulation No 17, dated 3 May 1962, a precise description of the relevant products is required, cannot be regarded as effected by the document dated 31 January 1963, which does not expressly mention electric copying machines. Hence, it is clear that the question posed by the court referring the matter certainly has no relevance for the decision of its case. In view of the principles laid down in the Salgoil case, it follows that the reference must be rejected as inadmissible.
2.
Nor can any different conclusion be drawn if the supplementary agreement in question is considered in relation to Article 4(1) of Regulation No 17, or in relation to Regulation No 67/67.
(a)
Article 4(1) of Regulation No 17 relates to agreements concluded after the entry into force of Regulation No 17. They must likewise be notified if exemption is sought, unless Article 4(2) is applicable (which in the present case — as already mentioned — can certainly he excluded). An exemption can then be granted with retroaction effect to the date of notification (Article 6 of Regulation No 17). The question of provisional validity could, therefore, also arise in relation to agreements of this kind.
In the present case, however, this question cannot arise because — as we know — there has never been a notification of the new agreement. Accordingly, there can certainly be no question of exemption for the period prior to the termination of the agreement for the infringement of which damages are claimed.
(b)
As regards Regulation No 67/67, whereby categories of agreements are exempted, this may, it is true, apply also to agreements which — like the supplementary agreement in the present case — were concluded before the entry into force of the regulation. However, the exemption applies — where the requirements of Regulation No 67 are satisfied — at the earliest from the date of notification of the agreement (Article 4(2)). In so far as the agreements of Regulation No 67 are not fulfilled and the regulation is only satisfied subsequently, the declaration of non-applicability under Article 85(3) can similarly take effect only from the date of notification of the agreement. Since in our case, however, the supplementary agreement has not been notified, it follows — as the Commission rightly points out — that the application of Regulation No 67/67 is also impossible.
3.
Having said all this, we should perhaps point out to the court referring the matter that on the facts of this case (that is, in seeking the right questions to ask about them), the failure to notify the agreement does not necessarily mean that it is void and that no claims can be based on it. The decisive question must rather be whether Articles 85(1) is applicable at all (since it is on this question that the need for exemption, and hence for notification, depends).
On this point the Commission rightly observes that it is conceivable that sole distribution contracts of the kind now in question may have the effect of limiting competition and affecting inter-State trade. This applies particularly in view of the clause in the contract whereby deliveries from other dealers into the territory subject to the concession are possible but impose on the suppliers the obligation of paying commission to the sole concessionaire. This could lead to a situation where other suppliers are not interested, so that customers in the territory subject to the concession find their possibilities of seeking alternative supplies restricted.
On the other hand, both the Commission's practice and the Court's case-law must be borne in mind, according to which only appreciable restrictions on competition and effects on trade are relevant for Article 85(1). The question whether they are appreciable must be answered — as we know from the Court's decisions — by reference to the ‘kind and quantity of the products forming the subject-matter of the agreement’, the position of the supplier and the concessionaire on the market in these products and the rigour of the clauses whereby the sole distribution right is protected.
Particularly in connexion with the last-mentioned point, it is worth mentioning that in the sole distribution agreement at present under consideration only a relatively small commission is required from other suppliers. It varies between 15 % and 5 % and is only due if the concessionnaire, within a specified brief period after invoicing of the goods by the defendant, informs the defendant about it. Viewed in this way, the facts seem to bear out the plaintiff's contention that this is merely a fair compensation for certain guarantees from which the supplier is relieved to the disadvantage of the party entitled to the commission.
This may lead to the conclusion that the provision for commission will scarcely, if at all, influence competitors outside the territory to which the concession relates, and so will not make parallel imports impossible and will not involve an appreciable effect on inter-State trade. To what extent this view accords with the detailed facts is a matter for the court referring the matter to determine. After a thorough investigation of all factors, it may — contrary to its previous assumption that the plaintiff enjoys completely exclusive rights — come to the conclusion that the impairment of trade is in reality merely trivial. Article 85(1) might then not be applicable at all. The agreement would be effective despite the lack of notification and there would be no reason in Community law for excluding claims based upon it.
4.
If, however, despite the clear decision in the present case on the question of relevance to a decision, it is still desired to examine the question posed, the following remarks may be useful.
Since the Bosch judgment was given, extensive efforts have been made to clarify the concept of ‘provisional validity’. They have led to a series of national judgments and an extensive literature, without, however, reaching a uniform conclusion. On one side of the broad gamut of conceivable solutions stand the proponents of a restrictive interpretation, for them the prohibition in Article 85(1) is the keynote which must have pride of place in any evaluation. Yet they do not, of course, go so far as to contend for the absolute nullity of notified agreements capable of qualifying for exemption until the Commission has reached a decision on the possibility of an exemption under Article 85(3) which might, in certain circumstances, be retroactive. Rather, they concede that an agreement might be voluntarily put into effect, and even recognize a certain binding effect upon the parties in the sense that they are obliged to cooperate with a view to obtaining the exemption and to avoid anything which might jeopardize the exemption. But they regard it as out of the question that in any circumstances the notified agreements might be enforced by legal proceedings, since they consider it an inadmissible concept that an organ of the State should be able to compel a party to a form of behaviour which — as might subsequently appear — amounts to a contravention of a prohibition imposed by public law. Hence, for the proponents of this view there can be no question of proceedings for fulfilment of an agreement or damages for its non-fulfilment, or proceedings against third parties requiring them to desist from certain conduct or to pay damages. In their view, for a court faced with a provisionally valid agreement, the only possible way of avoiding danger of mutually contradictory decisions is to suspend the proceedings (unless Article 9(3) of Regulation No 17 may be considered applicable to courts, a view which is not universally held and is clearly not relevant in the present case because, according to the statements of the Commission, the procedure before the Commission has not yet been commenced).
Rather less strict is the opinion of those who at least (albeit with different degrees of emphasis on the need for restraint) would allow the grant by courts of interlocutory measures, or even certain kinds of proceedings (such as actions to restrain interference by third parties, whilst in relation to claims for damages a suspension of the proceedings is considered necessary).
Finally, at the other end of the gamut of solutions is the standpoint that provisional validity means that the agreements in question provisionally have full legal effect, so that they can be enforced by proceedings before the courts. In this connexion, terms like “suspended effectiveness”, “presumption of validity”, “effectiveness subject to a possibility of avoidance” are used, or it is said that the agreements are valid so long as the Commission has not yet reached a decision. In the case of a subsequent refusal of the exemption, there must follow, according to this view, compensation by way of a claim for damages or for repayment in favour of the party who relied on the nullity of the agreement.
The plaintiff adopts the last-mentioned point of view. The Commission and the defendants in the main action, on the other hand, contend for the first-mentioned restrictive interpretation, the Commission relying in particular on the contention that the continuance of the prohibition of Article 85(1), despite the notification of an agreement and even without a prior decision of the Commission, is implicit in Regulation No 17, particularly in Articles 1, 6, 7 and 15, and also in Article 4 of Regulation No 19/65 and Articles 4 and 5 of Regulation No 67/67. This is not consistent with the acceptance of a validity enforceable in civil law, and the situation must rather be one of suspense, or suspended effectiveness.
In the face of the different points of view described, the Court's task is certainly not easy, particularly since good grounds can be adduced for each of the views expressed.
In the search for a solution to the problem, nothing decisive can be gleaned from the wording of the formula employed in the Bosch judgment, although it should be added that in that case the concept of validity seems rather to be placed in the foreground. One may say this because nothing is said about “suspended effectiveness” or — what amounts to the same thing—“validité imparfaite”. Nor is a reference to related phenomena in other fields of law of much assistance. This must be conceded by anyone who thinks of the right of avoidance in German civil law, that is, the possibility under private law of annulling fully effective contracts retroactively when certain conditions are fulfilled. The main argument against this is that one would thereby arrive at a system of legal exceptions, the acceptance of a mere right of intervention on the part of the Commission, and thus at a result which would no longer be covered by the compromise which many discern in the system of Regulation No 17.
On the other hand, if consideration is given to particular cases of suspended effectiveness (such as the case of official approval of transactions in land, or in the field of German cartel law), it may be said that a transfer of this concept into Community cartel law is impossible simply because — as the Commission itself points out — in its administrative practice substantially longer delays occur before a pronouncement on the application of Article 85(3) is possible.
For the attempt at a solution, the system of the Community legal order must be firmly borne in mind. On this basis it appears certain that the idea that the prohibition in Article 85(1) has priority in competition law finds no justification. Repeatedly, the Court has in this context emphasized the unity of paragraphs 1 and 3 of Article 85. Accordingly, paragraph 2 speaks of agreements prohibited “pursuant to this Article” (i.e. pursuant to Article 85 as a whole) and their nullity. References may also be made to Article 1 of Regulation No 17, whereby agreements etc. of the kind referred to in Article 85(1) of the Treaty are prohibited without the need for any prior decision, but where at the same time it is emphasized that this is “subject to the provisions of Articles 6, 7 and 23 of this Regulation”. Many deduce from this that the prohibition is dependent on the non-application of Article 85(3).
I would, therefore, suggest that those who permit only a voluntary putting into effect of notified agreements, and perhaps recognize that the parties to the contract are bound in the sense suggested by the Commission, fall short of the necessary minimum under the system of Community law. They must concede that under Article 1 of Regulation No 27 notification by one of several parties to an agreement is sufficient (and hence that the duty of cooperation between the parties, mentioned in this context by the Commission, can scarcely have any great significance). They must also admit that a voluntary putting into effect of notified agreements is already rendered possible inasmuch as the imposition of fines is precluded by Article 15(5) of Regulation No 17. To justify legal effects of this kind, it does not seem necessary to invoke the civil law concept of provisional validity, which in fact imports more extensive associations.
In reality — as Steindorff (
2
) correctly points out — this concept involves the acceptance of a law-making act on the part of the Court. It must, therefore, be our task to try to deduce from the substantive ideas contained in the Bosch judgment a meaningful further development, and in doing so to take into account particularly the legal reality which has developed since.
The following findings in the Bosch judgment merit particular attention. The Court emphasizes first that the mere presence of Articles 88 and 89 does not permit the conclusion that Article 85 has already, from the entry into force of the Treaty, enjoyed full effectiveness, and that the nullity under paragraph 2 applies to all the cases comprised in the provisions of paragraph 1 in which no declaration under paragraph 3 has yet been given. In the view of the Court, the authors of Regulation No 17 accepted that at the time of its entry into force some agreements within the meaning of Article 85(1) would exist in relation to which no decision under paragraph 3 had yet been given without their necessarily being thereby void. “The opposite interpretation” says the Court “would lead to the inadmissible result that some agreements would already have been automatically void for several years without having been so declared by any authority”. The Court concludes that in the case of agreements already in existence at the time when the regulation came into force nullity does not follow automatically because they fall under Article 85(1). “Such agreements and decisions” the Court continues “must be considered valid in so far as they fall within Article 5(2) of the said regulation; they must be considered as provisionally valid when, although not excepted by operation of that provision, they are notified in time to the Commission in accordance with Article 5(1) of the said regulation”. Finally, the Court draws the conclusion from Article 7 of Regulation No 17 that agreements and decisions are not automatically void unless the Commission has so declared or unless the authorities of the Member States have decided that Article 85 is applicable.
All this, in my opinion, makes it clear that the basic tendency of the judgment is to restrict the prohibitive effect of Article 85 and to place the concept of validity in the foreground. In the case of old agreements — with which, in the view of the Brussels court, we are solely concerned in the present case — the effort is particularly manifest to find a sensible transitional arrangement and to discern an intention to this effect on the part of the legislature. However, this means, in accordance with the general principles of law, that in principle the legal position must be maintained which had been established under the rules before the entry into force of Regulation No 17, in other words, the legal validity of existing agreements. It does not seem tenable that with the entry into force of Regulation No 17 there came about a transformation of this legal position into a “situation of suspense” (in the sense for which the Commission contends) which would permit only the voluntary fulfilment of agreements at the peril and risk of the parties, and that this should extend even to the relatively innocuous agreements which are not liable to noti fication. This would not be in accordance with the requirements of legal certainty, which are also referred to in the Bosch judgment, and on which the plaintiff in the main action has particularly relied. In my view it is not necessary to say anything further as regards the objective difficulties which considerably prolong the administrative procedure of the Commission, and lead to the result that there still remains a considerable number of agreements, notified in due time, in relation to which the Commission has not yet reached a decision.
If, then, all those considerations lead to the conclusion that as regards old agreements notified in due time, the concept of continuing validity must be placed in the foreground, it must be permissible not only to protect such agreements with the aid of interlocutory judicial measures, but it seems also appropriate to deduce from their provisional validity that claims for damages may be brought against parties in breach of contract (the question with which the main action before the Brussels court is clearly alone concerned).
Fundamentally we are faced with the need to strike a balance between conflicting interests. On the one hand there is the interest in permitting the execution of agreements which have been effectively entered into, and breach of which often involves the complete collapse of a whole system. On the other hand we have the general interest in upholding the competition system which, however, is diminished anyway by the universally recognized possibility of voluntarily putting into effect such agreements. Finally, as regards the danger of a serious impairment of competition law which might arise from the notification of agreements which manifestly do not qualify for exemption, this can be met by the Commission by means of warnings under Article 15(6) of Regulation No 17 (which must certainly lead to the suspension of any national judicial proceedings). The result of this balancing of interests seems quite clear. It seems more appropriate to allow the party who has broken an agreement to claim compensation in the event of a subsequent refusal of the exemption, rather than to impose on the party loyal to an agreement the danger of irreparable damage by refusing him access to judicial execution.
My view is, therefore, clear; under the Community system of competition law, as expressed in Regulation No 17, and by way of development of the basic principles of the Bosch judgment, the concept of provisional validity must be understood as including the right to enforce claims for damages based on duly notified old agreements against parties who have broken them.
5. Conclusion
Consequently, the question referred by the Tribunal de Commerce, Brussels, should be answered as follows:
The request for interpretation must in my opinion be rejected as inadmissible, since the question raised is manifestly not relevant for the decision of the national proceedings.
If the question is nevertheless to be answered, it must be stated that the provisional validity of a duly notified old agreement includes the right to enforce claims for damages against the party who has repudiated it in reliance on Article 85.
(
1
)	Translated from the German.
(
2
)	Rechtsschutz und Verfahren im Recht der Europäïschen Gemeinschaften, 1964, p. 104.