OPINION OF MR REISCHL — CASE 125/77
OPINION OFMR ADVOCATEGENERALREISCHL
DELIVEREDON 20JUNE 1978<appnote>1</appnote>
Mr President,
Membersof the Court,
The caseswhich concern us today are
about a product known as "isoglucose"
which we have already encountered in
Case 101/76 (Koninklijke Scholten-
Honig N.V. v Council and Commission
of the European Communities, judgment
of 5 May 1977[1977] ECR 797).
Isoglucose is a new sweetener in liquid
form which originated in the United
States at the beginning of the seventies,
100 kilograms of which are approxi­
mately equivalent to 71 kilograms of
white sugar. It is manufactured from
starch which has been obtained from
maize or wheat or potatoes. In the
Community the relevant raw material is
principally maize and to a lesser extent
other cereals and the recorded
processing figures vary between 70 %
and 85 % in the case of maize and
15% to 30% in the case of other
cereals. However from the autumn 1977
onwards — as we were assured— only
maize was used as the raw material
50 % of which had to be imported
because Community production falls
short of requirements. Isoglucose is
used in the industrial production of
foodstuffs where it can replace liquid
sugar.
In the Community isoglucose is manu­
factured on the one hand by the
Netherlands company Koninklijke
Scholten-Honig which, after obtaining a
licence in 1972 and building an
experimental plant, commenced
production in September 1973 and
increased it in September 1975 after
enlarging its factory. However in the
meantime the Scholten group, as we
heard during the oral procedure, has
become insolvent as from 7 March 1978
and a split-up of the group is apparently
under way. Isoglucose is also manu­
factured by the Belgian company G. R.
Amylum N.V., the applicant in one of
the actions for damages (Case 116/77)
with which I have to deal in my opinion
which follows this one. This company
also commenced production early on, in
February 1972, and likewise enlarged its
plant. In addition Royal Scholten-
Honig (Holdings) Limited, a subsidiary
of Koninklijke Scholten-Honig N.V.,
decided in 1973 to build a plant for
manufacturing isoglucose with an
annual capacity of 85 000 tonnes and
commenced building at Tilbury in
October 1974. Lastly the English
company Tunnel Refineries has in
recent years invested a considerable
amount of capiul in the manufacture of
isoglucose in connexion with an existing
starch factory. Part of the capacity thus
created has apparently been in use since
January 1976.
In the case of the manufacture of
isoglucose two groups of Community
provisions are material and their validity
has to be examined in the present
proceedings. One deals with the
granting of production refunds in
connexion with the manufacture of
starch products, the other with taking
isoglucose out of the organization of
the market in sugar and laying down
special common provisions for this
product, in particular the imposition of
a production levy on its manufacture.
On this point — it was in pan the issue
in Case 101/76 — the following
detailed information is necessary:
Article 11 of Regulation (EEC) No
2727/75 of the Council of 29 October
1975 (Official Journal 1975, L 281, p.
1) on the common organization of the
1— TranslatedfromtheGerman
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KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAPVOOR AKKERBOUWPRODUKTEN
market in cereals provides that a
production refund may be granted:
"(a) for maize and common wheat used
in the Community for the manu­
facture of starch;
(b) for potato starch;
(c) for maize groats and meal used in
the Community for the manu­
facture of glucose by direct
hydrolosis."
Article 11 (3) provides that the Council,
acting by a qualified majority on a
proposal from the Commission, shall
adopt rules for the application of this
article and fix the amount of the
production refund. The Council did so
by means of Regulation (EEC) No
2742/75 of 29 October 1975 (Official
Journal 1975, L 281, p. 57) on
production refunds in the cereals and
rice sectors which was amended by
Council Regulation (EEC) No 1862/76
of 27 July 1976 (Official Journal 1976,
L 206, p. 3) which entered into force on
1 August 1976. The latter regulation
provided for an increase of production
levies for the 1976/77 marketing year
because the threshold price for maize
had been increased. However in the
case of starch products intended for the
manufacture of isoglucose — and this is
one of the issuesin the present cases—
the rates of the refund for the 1975/76
marketing year were maintained and
refunds were no longer granted with
effect from 1 August 1977. This was
done in such a way that the refund paid
by the competent authorities of the
Member States to all starch manufac­
turers was recovered to the extent to
which isoglucose was extracted from the
starch. Commission Regulation (EEC)
No 2158/76 of 31 August 1976
(Official Journal 1976, L 241, p. 21)
lavs down the rules for the application
of Regulation (EEC) No 2742/75. By
virtue of Article 4 of Regulation (EEC)
No 2158/76 those rules entered into
force on 3 September 1976 and were to
be applied as from I August 1976.
In connexion with the special organi­
zation of the market in isoglucose some
of the principles of the organization of
the market in sugar which originally
included isoglucose must first of all be
recalled, since isoglucose has to be
assigned to tariff headings 17.02 D and
17.05 D which are specifically
mentioned in Article 1 of Regulation
No 3330/74 of 19 December 1974,
L 359, p.1).
The organization of the market in sugar
contains rules relating to quotas which
apply unul the end of June 1980. As
provided for in these rules each
Member State has a basic quota which
has to be allotted to the producers. A
sales and price guarantee applies up to
the amount of the basic quota (A
sugar): national intervention agencies
buy the sugar at the intervention price,
which is usually above the world price.
There is also a maximum quota (B
sugar) which has to be fixed every year
and is expressedas a percentage of the
basic quota. There is also a price
guarantee for it — in the 1976/77 and
1977/78 marketing years the maximum
quota amounted to 135 % and it was
reduced to 127.5% for the 1978/79
marketing year. However producers are
required to make a contribution to the
costs of intervention and expon — A
and B sugar can be exponed with a
refund — and the total losses incurred
by bringing on to the market sugar
which exceeds consumption are divided
by the quantities of B sugar produced.
However the total contribution may not
amount to more than 30 % of the
intervention price which represents a
ceiling for the 1977/78 marketing year
of 9.85 units of account per 100
kilograms of white sugar. Sugar
produced which exceeds the maximum
quota (C sugar) may in principle —
except when there is a shortage in the
Community as there was in 1974 and
1975 — only be sold on the world
market at world prices.
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OPINION OF МR REISCHL — CASE 125/77
Isoglucosewas taken out of the organi­
zation of the market in sugar because
specialprovisionswere laid down for it
by Council Regulation (EEC) 1110/77
of 17 May 1977 (Official Journal 1977,
L 134, p.1). Common provisions for
isoglucose,which amountedvirtually to
a mini-market organization, were laid
down in Council Regulation(EEC) No
1111/77 of 17 May 1977 (Official
Journal 1977, L 134, p.4) which was
adopted on the same day. It contains
provisionson trade with third countries,
import leviesand export refunds.But its
most important provisions,which have
special relevancein the present cases,
introduced a production levy for
isoglucose.In principle the amount of
this levy is the sameasthat applicableto
B sugar. However for the 1977/78
marketing year commencingon 1 July
1977 it is limited to five unitsof account
per 100 kilograms of dry matter; and
this amount shall only apply if the
production levy for B sugarexceedsfive
units of accountfor every 100 kilograms
of white sugarfor the sameperiod. The
Council has in the meantimeextended
this limitation to five units of account
until the expiry of the rules relating to
quotas, that is until 1980. Implementing
rules for applying the production levy
were laid down in CommissionRegu­
lation (EEC) No 1468/77 of 30 June
1977 (Official Journal 1977, L 162, p.
7). Under this regulation the same
method of calculation applies to
isoglucoseasto sugarbeet.
These provisions have caused several
anions to be brought in the national
courts.
Before the High Court of Justice in
Englandthe plaintiff in the main action
in Case 103/77 asked for a declaration
that the United Kingdom Government
is not empoweredto implementRegu­
lations Nos 1862/76, 1110/76 and
1111/77, becausethey are invalid; the
plaintiffs in the main anion in Case
145/77 asked for a declaration that
Regulation 1111/77 is invalid and
consequentlycannot be implementedby
the national Intervention Board. Several
reasonsbasedon Community law were
put forward in support which must be
consideredlater in detail. The plaintiffs
relied in particular on an infringement
of the prohibition of discrimination in
Article 40 and violation of the objectives
of Article 39 of the EEC Treaty andalsoof the principleof proportionality.
In the Netherlandscase the defendant
in the main action served on the
plaintiff, the Koninklijke Scholten-
Honig N.V., in December 1976 a
statementof accountof the production
refunds for processingmaize into starch
during the period from 1 August to 31
October 1976. Since this statement
worked out in accordancewith Regu­
lation No 1862/76 and No 2158/76
showed a debit for the said period in
respectof the processingof starch into
isoglucose, the plaintiff in the action
which it brought beforethe Collegevan
Beroepvoor het Bedrijfslevenaskedfor
reimbursement of the production
refunds which had been deducted. It
takes the view that the provisions of
Community law upon which the
statement of account is founded are
invalid becauseof failure to give a
statementof reasonsand infringement
of the prohibition of discrimination.It
also submitsthat there has been misuse
of powers and a breachof the principle
of legalcertainty.
Having regard to the arguments
submitted,which eachof the defendants
in the main anions opposes,the courts
before which the matters had been
brought stayedthe proceedingsand by
orders of 29 July, 12 October and 8
November 1977 referred the following
questions to the Court of Justice
pursuant to Article 177 of the EEC
Treaty for a preliminaryruling:
I. Case103/77:
"1. Is Council Regulation (EEC) No
1862/76 in so far as it purports to
insert Article 5a in Council Regu-
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KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAPVOOR AKKERBOUWPRODUKTEN
lation (EEC) No 2742/75 a valid
regulation?
2. Is Council Regulation (EEC) No
1111/77 a valid regulation?
3. Is Regulation (EEC) No 1110/77 a
valid regulation?"
II. Case 125/77:
"1. Must it be held that the reasons on
which Article 2 of Council Regu­
lation (EEC) No 1862/76 is based
are not stated in accordance with
the requirements of Article 190 of
the Treaty and if so does it follow
that Article 2 — Article 5a of
Council Regulation (EEC) No
2742/75 — is not binding?
2. Is the said Article 2 incompatible
with the principle of non-discrimi­
nation which is fundamental to the
Treaty and which is set out, in
particular, in Article 40 of the
Treaty and is Article 2 not binding
for that reason?
3. Does Regulation (EEC) No
1862/76 contain an amendment to
the system of granting refunds to
the starch industry, which
amendment, either of itself or
because of the fact that it was
suddenly introduced into the
aforementioned system which has
been applicable since 1967, is
incompatible with the principle of
legal certainty fundamental to the
Treaty and if so is that regulation
not binding in whole or in part,
namely in so far as it makes
provision for the said amendment?
4. Have the Council and the
Commission, by adopting Regu­
lation (EEC) No 1862/76 and Regu­
lation (EEC) No 2158/76
respectively, misused their powers
in that, in adopting those regu­
lations, they pursued objectives
other than those inherent in Regu­
lation (EEC) No 2727/75, particu­
larly because by those regulations
they introduced the aforementioned
change in the system of production
refunds with the aim of helping the
sugar industry which aim was not
and is not proper to Regulation
(EEC) No 2727/75 on the common
organization of the market in
cereals?
5. Must Article 4 of Commission Regu­
lation (EEC) No 2158/76 be
interpreted as meaning that, taking
account of the provisions of Regu­
lation (EEC) No 1862/76, those
refunds in respect of the manu­
facture of glucose with a high
fructose content which were
granted in the period from 1 August
to 3 September 1976, on which
latter date the regulation entered
into force, may be recovered on the
basis of the provisions of the said
regulation and those of Regulation
(EEC) No 1862/76, and if so, must
it follow that Regulation (EEC) No
2158/76 is not binding in whole or
in part, namely in so far as it makes
provision for the recovery of
refunds as mentioned above?"
III. Case 145/77:
The question asked was whether Regu­
lation (EEC) No 1111/77 of 17 May
1977 is invalid on any and if so which
of the grounds referred to in the
plaintiffs points of claim.
Before I consider these questions permit
me also to mention that those under­
takings and the Belgian company G. R.
Amylum Ν. V. have commenced
proceedings for damages against the
Council and the Commission. In these
proceedings — the casesin question are
Cases 116, 124, 143 and 153/77 — the
same rules are at issue, namely those
concerned with the lapse of the
production refund for isoglucose and
the introduction of a production levy on
isoglucose. I therefore think it would be
right for me to consider also the
arguments put forward in those
proceedings which are relevant to the
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OPINION OF MR REISCHL — CASE 125/77
question of the validity of the regu­
lations to be dealt with in the cases now
before us in the proceedings for a pre­
liminary ruling; I am dealing with these
casesin my present opinion.
I — I must preface my argumentation
with a brief observation on a question
of admissibility raised by the Council in
Case 145/77. The Council doubts
whether this reference for a preliminary
ruling is admissible, because the court
making the reference has simply
reiterated the plaintiff's complaints, that
is to say, it has not made any selection
from them having regard to the
arguments put forward by the parties,
and also has not stated clearly which
facts in this case may be assumed to
have been established.
Even if in fact the impression might thus
be given that these proceedings closely
resemble proceedings under Article 173
of the EEC Treaty, which because of
the regulatory nature of the acts of the
Community which have to be reviewed
could not have been instituted by the
individuals affected, I do not in the final
analysis see any convincing objection. It
must certainly be regarded as desirable
that a request for a preliminary ruling
should deal thoroughly with the circum­
stances of the case and the position
reached in the dispute and if possible
give the reasons why the questions are
referred to the Court. But there is no
express provision for this anywhere and
the present case is not the first in which
the form of the order making the
reference falls short of the ideal. In such
circumstances we simply have to
proceed on the basis that the problems
raised by the plaintiff appear to be
convincing to tne national court and
that it has subsequently made the
questions raised its own. The absence of
any analysis of the parties' submissions
should not therefore give us cause for
declaring the reference for a preliminary
ruling in Case 145/77 — and perhaps
the reference framed in the same way in
Case 103/77 — to be inadmissible.
II — As far as the content of the
questions referred to the Court is
concerned I would like first of all to
deal with the lapse of the production
refund relating to the manufacture of
isoglucose.
In this connexion consideration must
first of all be given to Regulation No
1862/76 which was adopted for the
purpose of amending Regulation No
2742/75, whereby the production
refund for products intended for the
manufacture of isoglucose was left for
the 1976/77 marketing year at the
previous year's level, and was not
therefore increased as it was in the case
of other products, and which provided
that as from the 1977/78 marketing
year a refund would no longer be
granted. Furthermore Commission Regu­
lation No 2158/76 also contains rules
implementing Regulation No 2742/75
and lays down the detailed rules for the
recovery by Member States of contri­
butions to the refund in so far as the
manufacture of isoglucose is concerned.
The orders making the references ask
whether these two regulations are valid
and also for an interpretation of Regu­
lation No 2158/76.
1. As far first of all as validity
concerned there is thus in essenceonly
one matter to consider since — on the
whole — in the case of Regulation No
2158/76 no specific reasons have been
advanced for its invalidity. In the
plaintiffs' view Regulation No 2158/76
would have no meaning if Article 2 of
Regulation No 1862/76 was proved to
be invalid. When examining the validity
of Regulation No 1862/76 there are
formal and material aspects to be
considered.
(a) The formal validity of the regu­
lation is called in question on the
grounds that the statement of the
reasons upon which it is based is inad­
equate, that it makes no reference to the
opinion of the European Parliament
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KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAPVOOR AKKERBOUWPRODUCTEN
which is required under Article 43 (2) of
the EEC Treaty and that isoglucose
manufacturers were not properly
consulted before its adoption. The
following are my detailed observations
on this argument:
(aa) The plaintiff in the main action,
which led to the reference in Case
125/77, takes the view that the
statement of reasons cannot be said to
be adequate even on the basis of the
requirements of the judgment of 13
March 1968 in Case 5/67 W. Beus
GmbH & Co. v Hauptzollamt München
[1968] ECR 83, according to which in
the case of a regulation more cannot be
expected than an indication of the
general situation and of the general
objectives which it seeks to attain. It
cannot also be said in the present case
that the objectives are to be inferred
from the rules relating to the refund,
contained in Regulation No 2742/75,
since Regulation No 1862/75 does not
refer to the said regulation but is
intended to amend it. Furthermore it is
important to note that the refund policy
has since 1967 applied indiscriminately
to all starch manufacturers and that it
can be inferred neither from the recitals
in the preamble to Regulation No
2727/75 — reference is made in this
preamble to the particular situation of
the starch market — nor from Article
11 thereof that a distinction can be
made according to the end products.
Having regard to this situation the
reasons for the abrupt change in the
refund policy, which occurred when
Regulation No 1862/76 was adopted,
ought to have been given and full parti­
culars should have been supplied to
explain why isoglucose had been made
an exception and why in this connexion
even the complete abolition of the
production levy was deemedto be right.
In answer to this the Council and the
Commission call attention to the fact —
inter alia by referring to the opinion in
Case 78/74 Deuka, DeutscheKraftfutter
GmbH B.J. Stolp v Einfuhr- und
Vorratsstellefür Getreide und Futtermittel
[1975] ECR 421, at p. 435 — that in
the case of legislative measures the
requirements for carrying out the duty
to give a statement of reasons are less
stringent if part of an entire system is
under consideration. On this point it is
important to bear in mind that Regu­
lation No 1862/76 is one of a series of
regulations. However the objectives of
that regulation, in so far as they can be
inferred from basic Regulation No
2727/75 and Regulation No 2742/75,
make it immediately clear why there is
no question of a production refund for
the manufacture of isoglucose. Fur­
thermore it must not be forgotten —
and this refers to the argument that the
Community has abruptly altered its
consistent refund policy — that
isoglucose is a new product, which only
appeared on the market in appreciable
quantities in 1976, and that since 1974
there have been indications of efforts to
abolish the refunds or at least to reduce
them considerably.
With reference to this argument it must
first of all be conceded that the recitals
in the preamble to Regulation No
1862/76 are not in fact drawn up in
great detail; they actually contain the
following:
"whereas however, given the objectives
of the production refund system, such
an increase should not be retained in
the case of products used in the manu­
facture of glucose having a high
fructose content."
However on the one hand I am of the
opinion that what was said in connexion
with the decision not to increase the
refund must naturally apply to its lapse,
that the reasons in the preamble
therefore form a logical entity. On the
other hand I take the view that the
reference to the objectives of the rules
relating to the refund is sufficient if one
follows the arguments in the Advocate
General's opinion in Case 78/74 and
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OPINION OF MR REISCHL — CASE 125/77
the relevant case-law to date (judgment
of 13 March 1968 in Case 5/67 W. Bern
GmbH & Co. v Hauptzollamt München
[1968] ECR 83; judgment of 20 June
1973 in Case 80/72 N.V. Koninklijke
Lassiefabrieken v Hoofdproduktschap
voor Akkerbouwprodukten, [1973] ECR
635; judgment of 18 March 1975 in
Case 78/74 Deuka, Deutsche Kraftfutter
GmbH B.J. Stolp v Einfuhr- und
Vorratsstellefür Getreide und Futtermittel
[1975] ECR 421 and judgment of 23
February 1978 in Case 92/77 An Bord
Bainne Co-operative Limited v The
Minister for Agriculture, not yet
published). In this connexion both the
basic Regulation No 2727/75 and Regu­
lation No 2747/75 have a role and it
must be regarded as immaterial that the
objectives of the rules relating to
refunds are mainly indicated in Regu­
lation No 2747/75, which had to be
amended by Regulation No 1862/76,
the one relevant in these proceedings.
The preamble to Regulation No
2727/75 refers to the special market
situation for starch, which might make
the production refund appear to be
appropriate. It can no doubt be inferred
from this that refunds for the manu­
facture of isoglucose have not been
included in the objectives of the rules,
since isoglucose, even if it is obtained
from starch, being a sweetener in the
proper sense of that word, does not
form, part of the starch market. The
preamble to Regulation No 2742/75 is
even clearer. It states that there is a
special situation on the market in
starches and that the starch industry
must ensure that its prices are
competitive with those of substitute
products. In this connexion special
reference is made to competition
between maize starch, riсе starch,
potato starch and substitute chemical
products However if the creation of the
capacity to compete with the products
of the chemical industry, especially the
petrochemical industry, which can buy
raw materials cheaply on the world
market, can be found to be the principal
justification for the rules relating to
refunds, it must accordingly follow that
refunds for isoglucose, which is not
exposed, or not yet exposed, to a large
extent to such competition, were not
included in the system established by the
rules.
In these circumstances the exclusion of
isoglucose from the rules relating to
refunds did not in fact call for any
special justification and the validity of
Regulation No 1862/76 can therefore
scarcely be called in question with
reference to the requirements of Article
190 of the EEC Treaty.
(bb) Furthermore one of the plaintiffs
notes the absence in Regulation No
1862/76 of any reference to an opinion
of the European Parliament to be given
in accordance with Article 43 (2) of the
EEC Treaty. It considers that such an
opinion is necessary because the said
regulation is not to be regarded as a
rule for the application of Article 11 of
Regulation No 2727/75 within the
meaning of that Article. In fact it has
exceeded the limits of the authorization
granted in that article, since Article 11
mentions production refunds for specific
products quite generally, and does not
provide that the Council may adopt
different rules according to the use for
which the starch was intended.
It is however scarcely possible to accept
this line of thought either. In the first
place within the framework of optional
rules relating to the levy, as in Regu­
lation No 2727/75, it seems quite
obvious that the Council must be able
within the context of the implementing
rules which it has to adopt to
differentiate between end products. This
cannot — if a too narrow definition of
the concept of "implementing rules" is
to be avoided and in this connexion I
refer inter alia to the judgment of 30
October 1975 in Case 23/75 Rey Sodav
Caisa Conguaglio Zucchero [1975] ECR
1279 — be regarded as a fundamental
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KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAPVOOR AKKERBOUWPRODUKTEN
change of policy in the field of refunds
on which the other Community
institutions had to be consulted. Further­
more reference can be made to what has
already been stated about the meaning
and purpose of the rules relating to
refunds. Thus it emerges from the
recitals in the preamble to Regulation
No 2727/75 that the rules relating to
refunds have been laid down with due
regard to the special situation which is a
feature of the starch market. That seems
to justify completely the exclusion from
the rules of products further processed,
which are not included in this market.
Such a formulation of the rules relating
to the refund in other words accords
with their objectives and for that reason
must fall within the category of what
are to be regarded as rules for the
application of Article 11 of Regulation
No 2727/75.
Since no provision has been made for
consulting Parliament on the
implementing rules within the meaning
of Article 11 of Regulation No 2727/75
and of Article 9 of Regulation No
1418/76 — these provisions laid the
foundation for the adoption of Regu­
lations No 2742/75 and No 1862/76 —
the fact that Parliament's opinion was
not obtained does not conduce to the
invalidity of Regulation No 1862/75.
(cc) Finally the same applies the
argument that the Community
institutions wrongly failed to consult the
glucose manufacturers before adopting
the regulations which are criticized.
On this particular point it suffices to
point out that the Treaty does not
provide for such consultation and that
there is no corresponding legal principle
— at all events when legislative
measures are being taken. Furthermore
contact was definitely maintained with
the interested parties. It was stated
during the proceedings, without being
challenged, that since June 1976 there
has been an exchange of views with the
starch manufacturers and mention was
made of a visit by officials to an
isoglucose factory. This thereby ensured
that some effect at least was given to
the interests of the parties concerned
before the new rules relating to the
refund were settled.
(b) In addition the validity of Regu­
lation No 1862/76 is also challenged
upon grounds relating to substantive
law. In this connexion there are three
grounds to consider:
— Infringement of the prohibition of
discrimination,
— Disregard of the principle of legal
certainty, by reason of the absence
of any transitional rules,
— Misuse of powers.
(aa) The isoglucose manufacturers feel
that compared with starch manufac­
turers, who continue to benefit from the
production refund, they have been
discriminated against, and in this
connexion they also have in mind the
effects of the new rules relating to the
refund on by-products such as feeding
stuffs and corn oil. They take the view
that it is not permissible to draw a
distinction according to whether there is
competition with chemical substitute
products. They make the further
submission that the rules provide for
discrimination within the group of
products which are exposed to the
competition of non-chemical products
and refer in this connexion to the fact
that a production refund continues to
be granted for the manufacture of
glucose.
I should like for the moment to leave
open the question whether the objection
can be raised against these arguments
that the producers of isoglucose and
starch are the same undertakings and
that there cannot therefore be said to be
discrimination against different
producen, because our considerations
must at least be based on economic
units. I will examine this problem in
another connexion, that is to say, the
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OPINION OF MR REISCHL — CASE 125/77
question whether attention must not
more appropriately be focused on the
products and the relations between them
in the field of competition.
For the purpose of evaluating the
complaint of discrimination it is now
sufficient to refer primarily to the
principal objective, which has already
been mentioned, of the rules relating to
the refund as expressedfor the first time
in Regulation No 1955/75. According
to that regulation starch manufacturers
should be enabled to meet the
competition of chemical substitute
products. Isoglucose manufacturers are
not in such a situation, the competition
of chemical products (cyclamates) only
being for them very much of secondary
importance. It may therefore be said
that the exclusion of isoglucose from
the rules relating to the refund appears
to be justified having regard to the
meaning and purpose of the rules, and
furthermore it has not been shown that
the terms of its exclusion have been too
narrowly drawn.
Furthermore there cannot also be said
to be any discrimination against starch
manufacturers because isoglucose and
starch are not products which compete
with each other. In this connexion
naturally the main products are taken
and not for instance the by-products
which are also obtained in the manufac­
turing process and consequently benefit
indirectly from the rules relating to the
levy.
Moreover as far as concerns the
reference to the fact that rules relating
to the refund continue to apply in their
unamended form to glucose manufac­
turers, it is also important to bear in
mind in this connexion that isoglucose
and glucose are not normally in
competition with each other. In any
case it seems to me to be convincing
that owing to the considerable
difference in the sweetening properties
each product must be assumed to have
its separate field of application and that
consequently the interchangeability
which is a prerequisite of the
prohibition of discrimination is absent.
Finally in this connexion the
Community institutions have also
pointed out — this consideration also is
relevant in the context of the principle
of equality of treatment — that it would
have to be said that there was discrimi­
nation against sugar manufacturers if
isoglucose manufacturen were to
continue to benefit from the production
refund.
Consequently the rules relating to the
refund also cannot therefore be
regarded as invalid because they have
provided for different treatment of
isoglucose products.
(bb) The applicants, in reliance on the
principle of legal certainty, also
complain that when the production
refund for isoglucose production was
abolished the existing capacities, in
which capiul had been invested before
the adoption of Regulation No
2727/75, were not taken into account
and that neither transitional rules nor
compensatory measures were adopted.
There were grounds for doing so,
namely that there had been production
refunds since 1967, that there had been
no announcement that the refund in
respect of the manufacture of products
competing with non-chemical products
might be discontinued and also that no
indication could have been inferred
from Regulation No 2727/75 of any
change in the refund policy.
However the Community institutions
answer this with good reason by
pointing out that a certain form of
transitional rules was adopted in that
the refund for the 1976/77 marketing
year contined at the old rate. Having
regard to current agreements and
commitments to deliver which had been
entered into this could in fan appear to
be sufficient. There were scarcely any
grounds for measures of adjustment or
compensatory measures going beyond
this.
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KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAPVOOR AKKERBOUWPRODUCTEN
Indeed if attention is focussed on the
refund rules which originaly applied —
according to Article 11 of Regulation
No 120/67 they were not optional — it
is of primary importance that according
to the recitals in the preamble to the
regulation they were adopted becauseof
the special situation on the market in
cereal and potato starches and of the
need to keep prices for those products
competitive with prices for substitute
products. When these rules were
introduced no-one even thought of
products such as isoglucose which do
not belong to the starch market and
also did not arrive on the market in
appreciable quantities until 1976. On
the other hand the Community
institutions have correctly pointed out
that undertakings which manufacture a
product that competes with sugar and
were familiar with the market in sugar
and starch products had from the very
beginning to be prudent when making
capital investments. They could not in
fact assumethat a set of rules laid down
mainly for other purposes would remain
unamended in a sector which might
create difficulties for the sugar market
and there was even less justification for
this assumption as the refund policy had
any way undergone substantial change
in recent years. A communication of the
Commission in the Bulletin of the
European Communities (Supplement
17/73, p. 14) had in fact already
mentioned the necessary amendments
and adjustments.
If on the other hand attention is
focussed on a later period when
considerable quantities of isoglucose
arrived on the market, it is then
important to note that the rules relating
to the refund, as can be clearly inferred
from Regulation No 665/75, were only
optional at that time. Moreover it was
quite clear that for this period the
refund was intended — this emerges
from the recitals in the preambles to
Regulation No 1955/75 and Regulation
No 2742/75 — to make starch products
competitive with synthetic substitute
products. As I have already mentioned
this prerequisite did not apply to
isoglucose. No one could therefore rely
on the optinal rules relating to refunds
being maintained in force just for a
product of that kind.
From the standpoint also of legal
certainty the existence of a defect which
might make Regulation No 1862/76
appear to be invalid can therefore
hardly be established.
(cc) The complaint of misuse of
powers which still has also to be dealt
with in this connexion is founded on the
argument that Regulation No 1862/76
was adopted within the framework of
the organization of the markets in
cerealsand that this meansthat the regu­
lation could only pursue objectives
which were connected with that market
organization. But in fact — as can be
inferred from Regulation No 1111/77 —
it was support measures for the sugar
industry that were involved.
Considerations which apply to
competition between isoglucose and
sugar must be regarded as having no
relevance to rules laid down for the
implentation of the common organi­
zation of the market in cereals.
Measures benefiting sugar producers
could only have been properly adopted
within the framework of the common
organization of the market in sugar.
The Community institutions, in my view
convincingly, countered these inferences
with the assertion that the main reason
for adopting Regulation No 1862/76
was that they recognized that
subsidizing isoglucose was incompatible
with the fundamental aims of the rules
relating to the refund. Since such
considerations concern the very essence
of the rules relating to the refund they
in fact fall within the scope of the
common organization of the market in
cereals. However in addition to this the
view also seemsto me to be tenable that
when adopting agricultural measures—
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OPINION OF МR KEISCHL — CASE 125/77
and implementing rules laid down
pursuant to Anide 11 of Regulation
No 2727/75, which in the final analysis
has its origin in Article 43 of the Treaty,
are such measures — it must be
considered lawful to take into account
the effect on sectors other than those
directly considered, and in the present
cases even the fact that the retention of
the production refund in the case of
isoglucose would have amounted to
discrimination against sugar manufac­
turers. Finally the Community
institutions could in justification of their
assenion also refer to the case-law of
the Court and in particular to the
judgment of 21 December 1954 in Case
1/54 Government of the French Republic
v High Authority of the European Coal
and Steel Community (Rec. 1954-55, p.
7). In that case it was held in connexion
with the concept "misuse of powers"
that where a decision pursues more than
one aim, even if an unjustified ground is
included among the valid ones, this
would not make it invalid for misuse of
powers, provided that it does not
abandon attainment of the main aim. It
is my impression that this is at least the
case in these proceedings.
(c) All things considered I can
accordingly state that none of the
arguments put forward during the
proceedings warrants the conclusion
that Regulation No 1862/70 and as a
result Regulation No 2158/76 are
invalid.
2. After that for the purpose of inter­
preting Regulation No 2158/76 — part
of the examination of its validity must
no doubt also be carried out Írom a
particular angle — the following brief
observations must be made at the end of
this first section of my investigations:
Article 4 of the regulation expressly
states that it shall enter into force on 3
September 1976, but shall apply from I
August 1976 It follows quite clearly
from this that pursuant to Regulation
No 2158/76 production refunds for
isoglucose, which were granted during
the period from 1 August to 3
September 1976, are also to be
recovered.
It is in any case dear that there are no
legal misgivings due to this regulation
having retroactive effect which militate
against the administrative rules of Regu­
lation No 2158/76 being applied in this
way. In fact there is no genuine retro­
activity which might have had the effect
of imposing unexpected burdens upon
the parties concerned. As the
Commission has rightly observed this is
quite simply due to the fact that the
level of the refund and consequently the
amount recoverable have already been
laid down in Regulation No 1862/76
which entered into force on 1 August
1976 and that the direction to the
Member States to the effect that the
amounts of the refund, as far as they
concern isoglucose and exceed the
permissible limit, are to be recovered
can also certainly be inferred from this
regulation. This is conclusive in
deciding the matter and as against this
the question how the recovery is to be
effected technically in law is of minor
importance.
III — I come now to the second
section of my examination which has to
deal with the validity of Regulations
Nos 1110/77 and 1111/77. These regu­
lations took isoglucose out of the organi­
zation of the market in sugar and
introduced a production levy on it. In
this connexion it is important to note
that the levy fixed in the first instance
for a period of one year for isoglucose
at a lower level than for B sugar —
namely five units of account per 100
kg — , pursuant to a recently adopted
decision of the Council, shall apply until
the expiry of the rules relating to quotas
of the organization of the market in
sugar, that is until 1980.
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1. In this connexion it is, I feel sure,
appropriate first to assemble some
economic facts which could not be
considered at the outset and which are
of importance in examining the
arguments put forward by the plaintiffs
in the main actions against the validity
of the said regulations.
Firn of all as far as concerns the
Community sugar market, following
several years when sugar was scarce on
it and also on the world market, its own
production, to which are added imports
at guaranteed prices from African,
Caribbean and Pacific countries
amounting to about 1.3 million tonnes
in fulfilment of obligations under the
Lomé Convention which remains in
force until 1980, has been large in
recent marketing years. The sugar
market is confronted with stagnant or
even falling sugar consumption which at
about 9.3 million tonnes per year is in
the region of the basic quota.
Consequently the 1976/77 marketing
year produced surpluses of 1.7 million
tonnes in spite of small yields per
hectare attributable to the drought. In
the 1977/78 marketing year, with the
production of white sugar reaching
11.086 million tonnes — not counting C
sugar — and taking account of ACP
sugar imported into the Community, a
surplus of 2.6 to 2.7 million tonnes is to
be expected. In such circumstances and
in view of the fall in world prices
considerable sums of money are needed
to finance exports: thus in the 1977/78
marketing year the cost was first
calculated at 240 to 250 units of
account per tonne and recently at 220
units of account per tonne. The effect
of the surplus is also that market prices
are approximately the same as the
intervention prices or only slightly
above them.
As far as isoglucose is concerned the
production capacities, expressed in
white sugar equivalents, at the end of
1976 have been estimated by one
plaintiff at 70 000 tonnes, by the
Community institutions and the starch
manufacturers at 150000 tonnes and at
the end of 1977 by the plaintiffs at
160000 tonnes and 380 000 tonnes
respectively, by the Community
institutions at 400 000 tonnes. The
Community institutions also expect a
further increase of about 700 000 or
even 1 000 000 tonnes by 1980, in
answer to which the plaintiffs express
the opinion that the expansion of
production capacities is already slowing
down because of the lapse of the
production levy. In fact from the middle
of 1976 to the middle of 1977 75 000 to
88 000 tonnes of isoglucose were
produced — calculated on the basis of
the dry matter — which corresponds to
about 2 to 3 % of the entire production
of starch. One plaintiff gave as its actual
sales 112 000 tonnes for 1977 and
154 000 tonnes for 1978.
Isoglucose arrives on the market in
liquid form. This can be seen as a disad­
vantage because it has to be kept at a
particular temperature and is more
difficult and expensive to transpon than
sugar. The advantages enjoyed by
isoglucose were stated to be inter alia
that it is rich in natural fructose and
colourless, that it has a neutral taste
which brings out the flavour of fruits
and has a high degree of solubility and
that when it is stored it is not exposed
to the risk of infection from microbes.
The price of isoglucose is clearly
dependent upon the price of sugar but
appears to be a few per cent below the
price of liquid sugar; figures of 5 to
7 % or even 10 to 13 % have been
mentioned. In this connexion the disad­
vantages which have been mentioned
and the fact that isoglucose is a new
product are relevant. Furthermore in
this context attention was drawn to the
somewhat lower sweetening properties,
which are however disputed, and to the
fact that two materials have to be stored
simultaneously by the manufacturers,
the specific reasons being that
isoglucose is regularly mixed with sugar
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OPINION OF MR REISCHL — CASE 125/77
and that inter alia the sweetening prop­
erties are greater if there is a mixture
than would be arithmetically expected.
It is not disputed that isoglucose can
only replace sugar in the industrial field
which accounts for about half of
consumption. To what extent isoglucose
is expected to oust sugar from this field
remained of course a controversial issue.
The isoglucose manufacturers adhere to
the view that at the present time there is
a market for liquid sugar of 700 000
tonnes and that, since the products have
to be mixed, about half of it can be
taken up by isoglucose. Their view is
that, last but by no means least, for
reasons of taste isoglucose is only
expected to be used in the drinks
industry and also generally in larger
concerns and they believe — also
because the use is restricted in part by
administrative provisions — that
isoglucose in the longer term will only
replace about 7 % of sugar
consumption. The Community
institutions on the other hand submit
that the liquid sugar market is not the
only criterion since pan of the sugar
bought by the industry is solid sugar
which it liquifies itself. They point out
that the use of liquid sugar is on the
increase — in the United Kingdom it
already accounts for 16 % of
consumption — and that it is certainly
not essential, especially in the drinks
industry, to mix isoglucose with liquid
sugar. They therefore expect that in the
long term isoglucose will have a share
of up to 30 % of the sugar market. This
estimate has been confirmed in a
measure by a paper produced during the
proceedings and indicating that more
than 2 million tonnes of sugar will be
replaced in Western Europe by
isoglucose are similar — against which
must be set another nudy giving a
figure in the order of one million tonnes
and a forecast by a sugar manufacturer
of an isoglucose market of 1.5 million
tonnes.
Finally mention must also be made in
this connexion of the fact that
according to the statements of the
Community institutions isoglucose is
manufactured in the Community by five
or six modem undertakings of the most
convenient size and in the ben possible
locations. On the other hand sugar
manufacturing in the 1976/77
marketing year was spread over 100
undertakings with more than 200
factories. Most of them are near areas
where sugar beet is cultivated, some are
old and small and their competitive
capacity — depending on the region
and the harvest — varies considerably.
2. If I next turn to the examination of
the regulations mentioned just now —
Regulation No 1110/77 which took
isoglucose out of the organization of
the market in sugar has no significance
in this connexion on its own — the firn
question which might be raised is
whether the production levy on
isoglucose affects the manufacturers
concerned at all. There are grounds for
doubting whether it does in view of the
assertion of some of the plaintiffs that
the lapse of the production levy itself is
making the manufacture of isoglucose
unprofitable and forcing them to stop
production. If this were the case, if
isoglucose therefore were no longer
being manufactured becauseof the lapse
of the production refund, the rules
relating to the levies would in fact not
apply and consequently the questions
relating thereto would be irrelevant.
Nevertheless it seems to me that for
various reasons there is no justification
for breaking off the examination at this
point on that ground.
One such reason is that is has not so far
been clearly established that the
consequence indicated — cessation of
production — is bound to flow solely
from the lapse of the refund. The
plaintiff Amylum has not adduced any
evidence to this effen and the plaintiff
Tunnel Refineries only mentions a
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KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAPVOOR AKKERBOUWPRODUCTEN
decline in profils due to the lapse of the
production refund. Finally no circum­
stances exist which threaten an
immediate cessation of production; if
the worst came to the worst this would
only be something to be feared in the
future, should long term market
conditions without a refund not allow
isoglucose to be manufactured prof­
itably. If however it cannot thus at the
present time be said for certain that the
rules relating to the levies are not a
matter of importance to isoglucose
manufacturers then the examination of
the questions of validity referred to us
cannot be abandoned.
3. When examining the reasons put
forward to establish the invalidity of
Regulations No 1110/77 and No
1111/77 I will first of all consider once
again the formal complaints.
(a) Thus one of the plaintiffs drew
attention to the opinion of the
European Parliament (Official Journal
1977, C 93, p. 14) which shows that
Parliament thought it advisable to
extend to isoglucose the treatment
applicable to sugar. In the view of this
plaintiff the Community legislature is
obliged according to Article 190 of the
EEC Treaty to give a statement of the
reasonswhy it has not acted upon the
opinion. There is no such statement of
reasonsin the present cases.
In my view we cannot accept this
argument. The predominant reason for
this is not so much the fact that the
Council has not completely disregarded
the opinion of the European Par­
liament; the decisive factor on the
contrary is that, although the duty to
consult is laid down by Article 43 of the
Treaty, it certainly does not follow that
the opinion given must be considered or
that if it is disregarded specific reasons
for this must be stated. This point was
settled early on by the case-law of the
Court in similar circumstances in the
context of the Treaty establishing the
European Coal and Steel Community
(cf. Case 4/54 Associazione Industrie
Siderurgiche Associate (I.SA.) v High
Authority of the European Coal and Steel
Community (Rec. 1954-55, p. 177)).
The same must naturally apply in the
field covered by the EEC Treaty.
(b) In connexion also with the intro­
duction of a production levy there is a
further complaint that the isoglucose
manufacturers were not consulted
beforehand.
On this and also the corresponding
complaint concerning Regulation No
1862/76 it must be noted that no such
obligation exists under the Treaty. Furth­
ermore we know that, on the one hand,
there were contacts between the
Community institutions and the branch
of industry affected — there was a
meeting in the autumn of 1976, the
minutes of which have been produced,
and according to the Council's
statements there was extensive
correspondence from June 1976 to May
1977 between the Community
institutions and the undertakings
concerned and also a visit by officials of
the Commission to an isoglucose
factory. On the other hand it is
important to bear in mind in this
connexion that the Economic and Social
Committee which has the specific
function of taking due account in the
legislative process of the interests of the
businesscircles involved was in any case
consulted. (Official Journal 1977, C 77,
p. 18).
Regulations Nos 1110/77 and 1111/77
cannot therefore be said to be vitiated
by any formal and procedural defects.
4. The examination of the substantive
arguments submitted concerning the
validity of the two said regulations is
more difficult and coversa wider area.
(a) In this connexion I turn first of all
to the question whether the Council
could adopt Regulation No 1111/77,
which is expressly based on Articles 42
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OPINION OF MR REISCHL — CASE 125/77
and 43 of the Treaty and refers to the
objectivesof Articles 39, as a measure
relating to agricultural policy or
whether it can be said againstthis that
isoglucoseis not an agricultural product
within the meaningof the Treaty.
In this connexion one of the plaintiffs
relies on the opinion of the European
Parliament which has already been
mentioned and which describes
isoglucoseas an industrial product. It
also refers to the definition of agri­
cultural products in Article 38 of the
Treaty which only includesproductsof
first-stage processing.Isoglucosewhich
is produced by second-stageprocessing
does not fall within this definition and
Annex II to the Treaty providesno help
either, for a wide interpretationof this
Annex cannot turn agricultural products
into industrialproducts.
When considering this question it is in
my view important to bear in mind that
isoglucose falls within tariff headings
17.02 and 17.05 of the Common
Customs Tariff. No problems arise on
this account in the case of the first tariff
heading because from the very
beginning it was set out in Annex II.
As far as concerns tarif f heading 17.05
it is true that it was not inserted in the
list in Annex II until the adoption of
Regulation No 7a of the Council of 18
December 1959 (Official Journal,
English Special Edition 1959-1962, p.
68). However in my view Article 38 is
to be interpreted in such a way that
paragraph (3) thereof as well as Annex
II to the Treaty are invariably
considered in the version from time to
time in force. Furthermore it has been
established by the case-law of the Court
(judgment of 29 May 1974 in Case
185/73 Hauptzollamt Bielefeld v Offene
Handelsgesellschaftin Firma H. C. König
(1974] ECR 607) that the number of
operations is not the criterion for
determining the concept "first-stage
processing" and that the ratio between
the cost of the basic product and the
processedproduct is a material factor.
However sincein the caseof isoglucose,
as we have heard, the costsof the raw
materialsaccountfor 50 % of the entire
costs there can indeed be scarcelyany
doubt that within the meaning of the
Treaty isoglucose is an agricultural
product of first-stage processing and
that the Community institutions are
accordingly empowered to lay down
rules in the context of Tide II on Agri­
cultureof the Treaty.
It must be noted in connexion with the
view put forward by one plaintiff,
namely that in the case of processed
products the procedure prescribed by
Article 235 of the Treaty ought to have
been adopted, that the Community
institutions could safely have recourse
to Article 43 of the Treaty. In any case
the Council's contention that it must be
possible to introduce a charge under
Anide 43 if there is already a charge of
this kind on competing products seems
to me to be tenable in this connexion.
(b) It was then also submitted that the
revenue from the production levy on
isoglucose could not be treated as "own
resources" within the meaning of
Council Council Decision of 21 April
1970 (Official Journal, English Special
Edition 1970 (I), p. 224), since neither
the requisite conditions, of subpara­
graphs (a) or (b) nor of the last
paragraph of Article 2 are fulfilled. It
follows that the contribution cannot be
used for financing sugar exports; the
objective which it sought to attain
cannot therefore be achieved and for
that reason alone levying it must be
regarded as unlawful.
This argument also seems to me to be
unconvincing. It must, I admit, be
conceded that in the present cases
Article 2 (b) of the said Council
decision, which only applies to customs
duties, and the last paragraph of that
article, which makes compliance with
the procedure prescribed by Article 201
of the Treaty a prerequisite, do not
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KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAPVOOR AKKERBOUWPRODUKTEN
apply. However I do not consider that
one need have any qualms about
invoking Article 2 (a) with reference to
the levy on isoglucose. In this article
appears the very wide-ranging
expression "within the framework of
the organization of the markets in
sugar" according to which I imagine
even a very close actual connexion with
this organization of the market should
suffice. In this context one point of
interest is that isoglucose was included
originally in the organization of the
market in sugar and taken out of it
because a special set of rules was
adopted for it. Furthermore the levy on
isoglucose, as can be inferred from the
recitals in the preamble to Regulation
No 1111/77, is specifically designed to
finance exports of surpluseswhich come
onto the sugar market. Accordingly the
levy on isoglucose should be treated as
"own resources" within the meaning of
the Council decision, and it is therefore
plain that its use for the said purpose
certainly does not come up against any
legal obstacles arising out of the
financial system.
(c) In the third place the argument
that the rules relating to the levies on
isoglucose are incompatible with the
objectives of Article 39 of the Treaty
must be examined.
The plaintiffs' main submission in
support of this argument is that because
the levy leads to the production of
isoglucose being stopped, technical
progress within the meaning of Article
39 (a) of the Treaty is impeded, and by
no means the least of the consequences
of this is that the effect both on the
work force in isoglucose factories and
on that part of the agricultural
Community which produces the
necessary raw materials for the manu­
facture of isoglucose has not been taken
into consideration. The measure also
runs counter to the obiective in Article
39 (d) of the Treaty since isoglucose
can help to assure the availability of
supplies when sugar is scarce by
stabilizing the market. Furthermore the
isoglucose regulation, which in fact
increases prices, has disregarded the
objective of ensuring that supplies reach
consumers at reasonable prices (Article
39 (e)). However it has not been shown
in each case that disregarding these
objectives in order to pursue another —
the Community institutions as we know
refer primarily to the stabilization of the
market — is essential.
It is in my view advisable at the
beginning of the examination of this
complaint to recall that the decided
cases of the Court have repeatedly
stressedthat all the objectives of Article
39 cannot be pursued at the same time
and with equal effect and it is therefore
permissible to give one or other of them
priority (cf. for example judgment of 13
March 1968 in Case 5/67 W. Bern
GmbH & Co. v Hauptzollamt München
[1968] ECR 83; judgment of 24
October 1973 in Case 5/73 Balkan-
Import-Export GmbH v Hauptzollamt
Berlin-Packof [1973] ECR 1091;
judgment of 2 July 1974 in Case 153/73
Holtz & Willemsen GmbH v Council
and Commission of the European
Communities [1974] ECR 675). The
Community institutions have a wide
discretion in this matter. They exercise
it according to the economic circum­
stances.On the other hand the case-law
of the Court nowhere indicates that
giving preference to one objective
requires evidence that in the interest of
that objective it is essentialto disregard
other objectives.
As far then as the individual objectives
referred to by the plaintiffs are
concerned the following are my obser­
vations on the alleged disregard of
them.
With reference to Article 39 (a) it is
certainly of importance that it uses the
expressions "agricultural productivity"
and "rational development of agri­
cultural productivity" and "rational
2023
OPINION OF MR REISCHL - CASE 125/77
development of agricultural pro­
duction". This provision can scarcely be
invoked if the effects of a rule on new
methods in the processing industry are
at issue.
To this must be added that it has not so
far been established that the rules
relating to the levies for the time being
in force make it impossible to manu­
facture isoglucose. In support of this the
figures produced so far, on which the
Community institutions have registered
some doubts and have not as yet gone
into in sufficient depth, are probably
inadequate. There is the further point
that the plaintiff in Case 125/77 only
says that becauseof the levy isoglucose
has to a great extent been eliminated
from the market and that the plaintiff
Tunnel Refineries nevertheless began to
produce isoglucose in 1978 even if the
scale of production was smaller than
originally planned.
The plaintiffs' reference in this
connexion to the situation of the
workers in isoglucose factories is
undoubtedly inadmissible. In my view
such considerations have no place in the
context of Article 39 (a). If they were
appropriate reference could on the
other hand also be made to the situation
of the workers in the sugar industry
which is plainly much more labour
intensive and represents a threat to
isoglucose.
Last but by no means least the
submissions put forward in this
connexion on the effects on the agri­
cultural community of impeding the
production of isoglucose also seem to
me to carry little conviction. It is true
that it is technically possible to manu­
facture isoglucose not only from maize
but also from potatoes and other
cereals. But the possibility of so using
the two last-mentioned products in the
Community as the Council with
reference to processing costs has
convincingly shown by means of
figures, is ruled out. With regard to
maize which alone is used the decisive
factor however is that in spite of
considerable expansion the production
of maize in the Community presents no
problems at all since it does not yet
meet Community demand by a long
way. In addition Community maize is
clearly less suitable for the manufacture
of starch and isoglucose than it is for
use as fodder. Consequently only less
than 100 000 tonnes of the Community
maize used for the manufacture of
starch — about 1 000 000 tonnes per
year — are supplied for the manu­
facture of isoglucose and imported
maize is mainly used for this.
The plaintiffs' reference to Article 39
(d) — the assurance of the availability
of supplies — cannot in my opinion
stand because, as has been explained to
us, the rules relating to quotas of the
organization of the market in sugar
have provided for a sufficiently large
safety margin. Furthermore for some
years there has been a surplus in the
Community — which amounted to 2.7
million tonnes for the marketing year
1977/78 — and this situation is
expected to continue both in the
Common Market and on the world
market for the foreseeablefuture.
Finally the plaintiffs' reference to Article
39 (e) — supplies reaching consumers at
reasonable prices — would not seem to
hold good. In this respect isoglucose
can indeed achieve nothing for the fores­
eeable future because in the main it
follows the sugar price. The point to
bear in mind about the sugar price is
that owing to the existing intervention
system and the present surplus its
movements are in any case close to the
lower Community price limit, namely
the intervention price. It does not drop
below that price if an additional
sweetenerappears on the market.
Conversely the submissions of the
Community institutions on the pursuit
of the objectives of Article 39 in
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KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN
connexionwith the production levy on
isoglucoseseemto meto beconvincing.
According to these submissions its main
purpose is to stabilize the sugar market,
that is to say, to counteract any increase
of the surpluses. In this connexion it
must be borne in mind that there are
already surpluses on the sugar market
and that in view of the obligations
under the ACP-EEC Convention of
Lomé and also the rules relating to
quotas which remain in force until 1980
and have established rights in a definite
way, there are scarcely any other
possible ways of reducing the surpluses.
In addition to the main purpose must be
mentioned the concern to ensure sugar
beet growers, for whom the applicable
organization of the market in sugar has
created certain rights, "a fair standard
of living" within the meaning of Article
39 (b). The possibility is not to be ruled
out that in fact a further expansion of
isoglucose and the attendant increase in
the price of sugar exports will cause
sugar beet growing to decrease, at any
rate as far as so-called B sugar is
concerned, to which indeed a lower
minimum sugar beet price applies. A
changeover by these agricultural
communities to products of which there
is not also now a surplus might however
not be practicable in the medium term,
quite apart from the fact that the culti­
vation of maize — this must be the
primary consideration — is not possible
everywhere for climatic reasons and that
for technical reasons (rotation of crops)
growing sugar beet cannot be
completely abandoned.
If all these maters are considered it can
in fact hardly be said that the rules
relating to the levies imposed upon
isoglucose prevent the attainment of the
objectives of Article 39, even if
considerations such as the fact that it is
in the interest of consumers for the
budget not to have to bear too great a
burden are disregarded.
(d) The question whether the rules
adopted discriminate against manufac­
turers of isoglucose, which is the
unanimousview of the applicants,now
hasto beconsidered.
Their view is that since isoglucose
competes with sugar it should not be
subjected to a higher charge than sugar.
That is however the position since the
whole of the production of isoglucose is
charged whereas in the case of sugar a
levy for financing exports is only
imposed on B sugar. If this charge is
expressed in terms of the entire
production of sugar, and at the same
time it is assumed that the B quota is
not usually exhausted, and if account is
taken of the lower sugar beet price in so
far as B sugar is concerned, that is to
say, of the fan that part of this charge
is passed on to the farmers, then in the
case of sugar an average charge of one
unit of account or less per 100 kg is
arrived at whilst isoglucose has to bear a
charge five times or more greater than
this.
The Community institutions in answer
to this refer to the fact that, since
isoglucose is put on a market where
there is a surplus, it is only logical to
treat it in the sameway as surplus sugar
and therefore to charge it in the same
way as B sugar. They also take the view
that the only object of the production
levy on isoglucose is to offset the
competitive advantage which isoglucose
derives from the organization of the
market in sugar and its rules for quotas
to which isoglucose is not subject. The
price of sugar from which isoglucose
also benefits would in fact be some
15 % lower were it not for the rules
relating to quotas. The Community
institutions also take the view that it is
not the charges on the products but the
consequential effects on manufacturers
which have tot be compared. Here it
must be borne in mind that sugar manu­
facturers only produce one product and
are entirely dependent upon one basic
product. On the other hand starch
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OPINION OF MR REISCHL — CASE 125/77
manufacturers, who also produce
isoglucose, have a wide range of
products and can have recourse to a
large number of basic materials. Since
they are all large undertakings which
are capiul rather than labour intensive
and since the proportion of isoglucose
in the production of starch is only some
3 °/o they are definitely in a position to
pay the production levy on isoglucose at
the prescribed rate. Finally isoglucose
derives benefits from the common
provisions applicable to it under Council
Regulation (EEC) No 1111/77 and is
frequently subject to a lower domestic
taxation than sugar. For the purposes of
considering whether there has been any
unequal treatment compared with sugar
objective reasons can be found and in
this connexion the objectives of Article
39 must be especially borne in mind.
It is obviously difficult to settle this
difference of opinion because two
systems have to be compared which
have been developed on quite different
lines. One only has to think of the
applicable restrictions on sugar
production, the rules relating to quotas,
and the obligation to keep stocks as
well as the guarantee to purchase sugar
which do not exist in the case of
isoglucose.
On the other hand the difficulties would
certainly not be removed by laying
down identical rules for isoglucose,
especially by introducing rules for
quotas corresponding to those of the
organization of the market in sugar.
The Community institutions had good
reason to show that in this connexion
the fixing and allocation of any quotas
would create serious problems, as at the
relevant time production capacities were
being built up and on the other hand
representative production figures were
virtually non-existent. If the rules
relating to quotas were to be practical
they might have necessitated cuts in the
sugar quotas; the arguments against
making such cuts might have been that
in this connexion rules have been laid
down until 1980, that in a certain sense
therefore acquired rights had to be
considered. It is therefore quite under­
standable that this problem was kept
back for consideration in connexion
with the future definitive rules which
are to apply from 1980 onwards. On the
other hand because of the growing
influence of isoglucose on the sugar
market it was imperative at least to
adopt provisional rules. When this was
done only certain rules relating to levies
were possible, if cutting the B sugar
quotas for the 1978/79 marketing year
is disregarded, which obviously could
not be effected for the preceding
marketing year, because at the relevant
time the sowing of sugar beet had
already taken place and certain
promises had been given that the old
quotas would be maintained.
If I now consider the rules relating to
levies on isoglucose from the standpoint
of discrimination some relatively simple
observations may first of all be made on
this aspea of the matter.
In my opinion the reference to the mini­
market organization for isoglucose with
its import and expon system and the
observation made in connexion
therewith that isoglucose derives certain
benefits from these rules which stabilize
the market are therefore irrelevant. In
fan it may well be that they have at
present and will for some time to come
have no actual effects. Isoglucose is in
fan only manufactured on a large scale
in the USA and Japan; imports from
these countries are hardly feasible
however owing to the disunce and the
existing transpon problems raised by
isoglucose In other words there is
consequently at the moment no world
market against the fluctuations of which
the manufacturer of isoglucose in the
Community would have to be protected
and this is borne out by the figures
produced by the Commission, during
the oral procedure, for imports and
exports of isoglucose since January
1978.
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KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAPVOOR AKKERBOUWPRODUCTEN
In my view the reference to the fact that
different domestic rules relating to
levies apply to sugar and isoglucose is
also not decisive. This is not the case in
all Member States — for instance not in
the United Kingdom. Furthermore it is
not for the Community institutions to
consider such divergences as it were in
passing when they establish a market
organization.
Furthermore it certainly cannot be
accepted as "logical" to treat isoglucose
as surplus B sugar simply because its
appearance on the market helps to
increase the sugar surpluses. This
argument in fact amounts to saying the
Community sugar market has so to
speak already been allocated and that
comparable new products in principle
have no place on that market but are
for export. There is no doubt that the
rules relating to quotas cannot have this
effect. Even if these rules are accepted
on account of the stabilizing effect they
have on the market — there is
important criticism of this as well —
they cannot possibly however have the
effect of making new developments in
this sector practically impossible or
unduly difficult. According to the basic
system of the Treaty, which is liberal,
access to the market must on the
contrary be guaranteed on the same
terms even if in certain circumstances
this involves additional sacrifices for the
general public.
Furhermore I consider it to be
inadmissible when making the necessary
comparison to focus on the position of
the manufacturersand to conclude from
it that large starch factories which also
manufacture isoglucose could within the
framework of their overall programme
which allows a certain flexibility cope
with production levies more easily than
labour intensive sugar manufacturers
many of which are only small. In this
respect the picture outlined by the
Community institutions requires some
correction because in factories where
isoglucose is manufactured it represents
a greater proportion of the production
programme (17 or 25 %) than it does of
the manufacture of starch as a whole.
However the fan that in underukings
having several production lines care is
taken to ensure that in principle each
individual product is in the long run
manufactured at a profit is even more
important. Therefore in my view one
can only focus on individual products,
which compete with each other, and
merely compare the charges imposed on
them and their capacity to bear such
charges. Moreover this appears to me to
be in line with the case-law of the Court
(judgment of 19 October 1977 in Joined
Cases 117/76 and 16/77, (Albert
Ruckdeschel& Co. and Hansa-Lagerhaus
Ströh & Co. v Hauptzollamt
Hamburg-St. Annen [1977] 1753) and
only in this way can an unintended
direct charge on starch production,
which in any case is under considerable
pressure from chemical competitors, be
avoided in the present case.
On the other hand the reference to
alleged discrimination against isoglucose
compared with glucose, which is also a
sweetener produced by starch manufac­
turers, to which the rules relating to the
levies do not apply must be regarded as
irrelevant. As to this I recall the point
which has already been made in
connexion with the examination of the
rules relating to refunds that becauseof
the considerable difference in the
sweetening property there was no
competition.
When considering the question what are
the criteria in accordance with which a
somewhatbetter balanced set of rules —
in view of the complexity of the
relationship more cannot be required —
can be found for isoglucose and sugar,
one might first consider treating the
levy on isoglucose as simply
compensation for a 15 °/o price
advantage which isoglucose derives
from the organization of the market in
sugar. This appraisal stems from the
history of the establishment of the
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OPINION OF MR REISCHL — CASE 125/77
organization of the market in sugar. At
that time there were various domestic
rules with officially fixed prices and
production quotas: their principal
feature was that owing to the differing
price patterns in the Member States
there was no uniform price level. On
this basis an approximate market equi­
librium could also have been
established for the common organi­
zation of the market in sugar and other
products solely by means of a price
system. However, if this had been done
prices would have had to be at approxi­
mately their low level in France with the
result that beet growing in regions at a
disadvantage would no longer have
been possible. In order to rule out this
possibility a higher price level — at
approximately the Italian and German
prices — was chosen. However, in view
of the existing production capacities,
which allow 14 million tonnes of sugar
to be produced, such a price-level made
restrictions on production necessary, if
inordinate surpluses were not to arise.
The Community institutions argue that,
had it not been for these rules relating
to quotas, the Community price level
would have been lower, namely by
about 15 %. Since isoglucose benefits
from the rules on prices applicable to
sugar without being subjected to any
restrictions on its production it can be
said that the rules relating to quotas
give isoglucose a competitive advantage
of about 15% of the intervention price
which corresponds to approximately five
units of account. Nevertheless I doubt
whether these reasons given for the
amount of the levy on isoglucose are
correct. There can certainly be no doubt
that there is a link between the sugar
price level and the rules relating to
quotas. The price advantages however
also apply to the sugar manufacturers
and in their case — and this is
important — the rules relating to quotas
have very different effects; favourably
located modern factories can readily
produce the full B quota and indeed
even C sugar, since there is in fan
therefore no restriction of their
production. Therefore I do not see how
the disadvantage at which sugar manu­
facturers are placed by the rules relating
to quotas can be quantified at 15 % of
the intervention price, as the
Commission has assumed, and why
accordingly in the case of isoglucose
there was said to be a similar
competitive advantage, which could as it
were be creamed off. For this reason I
prefer to centre the examination on a
comparison of the charges applicable,
on the one hand, to isoglucose and, on
the other hand, to sugar.
In doing so there certainly seemsto me
to be no justification for proceeding as
the applicants have suggested, that is to
say, ascertaining the average charge of
the entire sugar industry by means of
which — allowing for the lower price of
sugar beet in the case of B and C sugar
— with the B quotas being completely
used up one then arrives at a charge of
about one unit of account per 100 kg,
and what is more, if account is taken of
the fan that in the years 1971 to 1976
production of B sugar only amounted to
between 11 and 19 % of the production
of A sugar, that is taking as a basis the
anual average production of B sugar, a
charge of only one half of a unit of
account is arrived at. In my view this
method of calculation fails to appreciate
two essential aspens. In the first place
the history of the establishment of the
organization of the market in sugar
reveals that A quota sugar is intended in
principle to support producers in un­
favourable regions and that B quota
sugar is designed to encourage
production where it is more competitive
and where if need be C sugar could also
be produced. From this angle the idea
suggests itself of forming a group of
sugar producers for whom first and
foremost B quota sugar is meant. On
the other hand it is of importance that
isoglucose manufacturers have large
modern factories which have much
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KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAPVOOR AKKERBOUWRODUKTEN
lower labour costs than sugar factories.
It is therefore natural to compare them
with corresponding modern sugar manu­
facturers who are favourably located
and also work efficiently. They are
unquestionably manufacturen who also
produce C sugar in large quantities and
for whom therefore the production
restrictions of the rules relating to
quotas are in practice of as little
importance as they are for isoglucose
manufacturers.
The Commission also took this as a
suiting point when it gave us the
example of a modern sugar factory
which produces a great deal of C sugar
— in the year 1976/77 87 % of the A
quota. In the case of this undertaking it
calculated on the basis of the
production figures of the 1976/77
marketing year an average charge on
sugar of 11 units of account, by
applying the actual production figures
for the year 1976/77 which became
known later, a charge of 8.71 units of
account and for the year 1977/78 a
charge of 13.80 units of account per 100
kg. However in my view such an
example can scarcely be satisfactory,
especially as we were told during the
hearing that in the factory in question a
very large amount of C sugar was
produced, that a large increase of its
quota and of its production was
effected, but that it ran at a loss in the
1976/77 marketing year. On the
contrary I consider that it is necessary
to place the examination on a broader
basis and include all similar under­
takings in the investigation. In this
connexion it is appropriate to confine
the investigation to the 1977/78
marketing year, not only because a
production levy was imposed upon
isoglucose for the first time in this
marketing year, but also because the
drought in the preceding 1976/77
marketing year only permitted a
relatively small production of C sugar.
The Commission has told us on being
asked to do so what kind of a picture
emerges. According to that picture it
has to be assumed that sugar manufac­
turers bear a charge which is between
3.81 and 13.52 units of account per 100
kg. However I also consider — and on
this point I agree with the applicants —
that it is proper as far as concerns this
calculation to bear in mind that other
purchase prices apply to sugar beet
intended for the production of B and C
sugar, namely in the case of B sugar a
minimum price reduced by 30 % and in
the case of C sugar — as there is no
minimum Community price for it — a
market price which in 1976 apparently
only amounted to something more than
half of the minimum price for sugar
beet. There were thereby included in the
comparison, not as might be expected
elements of the production costs which
would have been improper but factors
relating to the market organization
which in the common organization of
the market are fixed and are calculated
to shift a specific portion of the charge
on to sugar beet farmers, in the case of
B sugar — as the sugar industry itself
admits — about 60 %. If one proceeds
in this way and if appropriate
corrections are made to the figures
produced by the Commission — the
applicant Amylum has worked them out
by way of example — then one arrives
at charges which are valued at five units
of account for six undertakings, at
rather less for four undertakings and at
even more than five units of account for
four undertakings. However, on that
basis and especially if it is borne in mind
— and the Commission considers it is
appropriate to do so — that frequently
more than the minimum price,
sometimes even the A price, was paid
for B sugar beet, it can be said that the
average charge on such sugar manufac­
turers on the whole corresponds to the
charge which isoglucose manufacturers
also have to bear. We should in the
main stick to this method since the
quantification of other factors (the
advantages accruing to the isoglucose
2029
OPINION OF MR REISCHL — CASE 125/77
manufacturer from lower marginal costs
and the existence of by-products —
guaranteed purchase of sugar and the
sugar manufacturers' obligation to keep
stocks) is unsatisfactory.
In the final analysis this means that the
production levy fixed for isoglucose,
which from now until the end of 1980 is
to be five units of account per 100 kg
does not in fan discriminate against
isoglucose manufacturers, and
accordingly it is unnecessary to go
further into the question whether
placing isoglucose at a disadvantage
might not even be justified on the
ground that we are only concerned with
transitional rules applicable for a few
years, that the sugar manufacturers
might be said to have well established
rights, that there might be a certain
Community preference for sugar
extracted from sugar beet produced in
the Community as against isoglucose
which is manufactured principally from
imported products.
(e) Since the complaint of discrimi­
nation, which is probably to be
regarded as the principal complaint is
thus unfounded, the question whether
objection could be taken to the rules
which have been adopted because they
are in breach of the principle of pro­
portionality must furthermore be
considered. As is generally known,
according to this principle which has
been repeatedly applied and explained
in the case-law of the Court, an official
measure must not have any greater
effect on private interests than is
necessary for the attainment of its
objective and it must be established that
it can only with difficulty be replaced by
lessstringent measures.
The applicants take the view that this
requirement is not satisfied for various
reasons by the rules relating to the
levies which have been adopted, the
purpose of which according to the
statements of the Community
institutions is to fix a contribution to the
financing of exports of surpluses and
thereby slow down the growth of
isoglucose. They take the view that an
appropriate contribution to the
financing of exports of surpluses —
quite apart from the fact that the
surpluses were to be disposed of in
another way, namely by reducing the
quotas — ought to have been
determined by the market share of
isoglucose, which at the present time is
about 3 Vo of sugar consumption. They
also take the view that, having regard to
the objective of slowing down the
growth of isoglucose, the production
levy must be regarded as excessive,
because the Community institutions
have obviously proceeded on the basis
of misconceptions as to the volume of
exports to be anticipated, as to
isoglucose's possible market share and
also as to its production costs, if the
latter were not quite wrongly wholly
left out of account. Furthermore the
fan has to be faced that the production
levy does not slow down the growth of
isoglucose but makes discontinuance of
its production unavoidable.
On this issue the following brief obser­
vations have in my view to be made.
In so far as the applicants mention
exaggerated fears concerning sugar
exports — they themselvesgive a figure
of about 500 000 tonnes for the current
marketing year — it must be borne in
mind that they have not succeeded in
questioning the figure of 2.7 million
tonnes give by the Community
institutions. It is apparent that the
applicants have simply carried forward
the production figures of A and B sugar
of the 1976/77 marketing year to the
following marketing year and deducted
from them the presumed consumption.
However, when they did this — apart
from the fan that it is necessary to
proceed on the basis of higher
production values — they overlooked in
particular the quantities in respect of
which there are obligations to impon
under the ACP-EEC Convention of
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KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAPVOOR AKKERBOUWPRODUCTEN
Lomé. If the values of the Community
institutions are taken as a basis and if
the charge accruing therefrom to the
budget is considered it is hardly possible
to talk of isoglucose manufacturers
being required to make an excessive
contribution. In fact they only bear less
than 3 % of all export costs: in relation
to the rate of the refund per tonne (220
units of account) their share (50 units of
account) amounts to less than one
quarter. If on the other hand only 3 °/o
of the total costs which sugar and
isoglucose producers bear were imposed
upon the applicants in accordance with
their market share, which they consider
to be the appropriate method, then the
other objective which has been
mentioned, the slowing down of the
growth of isoglucose, would hardly be
attained.
I am unable in addition to accept that
the production levy could in fan have
been avoided or reduced by an
amendment of the rules relating to
quotas applicable to sugar. Such an
amendment is ruled out with reference
to A quotas because in their case until
the rules which are at present in force
expire, that is until 1980, there is the
question of the legal situations which
have arisen. In the case of B quota
sugar a specific reduction was decided
upon for the 1978/79 marketing year.
However, in my view there are
significant considerations relating to
agricultural policy, which I examined
just now when I dealt with the
objectives of Article 39, which militate
against a reduction by an amount which
would considerably reduce the export
levy or eveneffectively abolish it.
Furthermore with regard to the
applicants' argument that when the
Community institutions fixed the levy
they proceeded on the basis of
misconceptions as to the production
costs of isoglucose and its potential to
oust specific quantities of sugar from
the market within a short time, it may
indeed turn out — and this refers to the
last mentioned point — that the
forecasts of the Community institutions,
which I mentioned just now when I
dealt with the economic dau, were
pitched too high. On this point
reference can indeed be made to the
fan that the lapse of the production
refund has a slowing down effen and
that in some Member States legal rules
restrict the use of isoglucose. Fur­
thermore it is of interest to note that on
the American market, an area in which
isoglucose has already been produced
for a long time, where the production
of sugar is inadequate but a large
amount of maize is produced and where
perhaps reasons of taste and business
patterns enable isoglucose to be used
extensively, the production of
isoglucose for the 1976/77 marketing
year is said to have amounted to only
about 1.2 million tonnes. However,
according to the contentions of the
Community institutions the level of the
production levy has not been fixed on
the basis of isoglucose's potential share
of the market. Likewise the production
costs of isoglucose did not serve as a
guide-line for determining the levy. On
the contrary the main idea for this was
to charge isoglucose and sugar in the
sameway.
Finally in connexion with the principle
of proportionality — and with this
observation I conclude my remarks on
this complaint — there can be no
question of proceeding on the
assumption that the levy was fixed in
such a way that it renders the manu­
facture of isoglucose impossible. On the
contrary it is my impression that the
figures which have so far come to light
are insufficient to support such an
assumption. Likewise a charge which
modern sugar factories seem to be able
to bear can also be borne in the same
way by the less labour intensive manu­
facturers of isoglucose. However, in
principle this viewpoint can least of all
have any decisive significance when all
other considerations point to the charge
2031
OPINION OF MR REISCHL — CASE 125/77
being fair. If the position were as the
applicants consider it to be then it
would only be evident that the manu­
facture of this new product, in which it
was decided to invest when the
economic situation was entirely
different, just cannot be carried on
economically under existing circum­
stancesand in sucha way asto maintain
the conditions of competition which
applyto sugar.
(f) The applicants also submit that the
Community institutions have wrongly
failed to provide for any transitional
rules and derogations for existing
capacities and the argument put forward
in the proceedings relating to the
liability of public authorities for
damages that the applicants have been
frustrated in their legitimate
expectations is connected with this.
The applicants point out that isoglucose
has for some time benefited from
production refunds, that is to say, from
certain measures to promote it. The
Community institutions were aware of
the efforts to develop isoglucose in the
Community and also knew about the
consequent decisions to invest in it.
Nevertheless they did not at any time
draw the attention of the applicants to
the fan that in view of a threat to the
sugar market caused by isoglucose
production measuresmight be adopted.
As far as the first part of this argument
is concerned it suffices to refer to the
fan that it has already become clear in
this case that the production refund was
not intended for isoglucose and that the
latter was not included among the
objectives of the relevant rules. The fact
that isoglucose manufanurers benefited
for a time from the rules relating to the
refund does not establish any legitimate
expectation of further encouragement
and preferential treatment.
For the rest there can only be said to be
a breach of the principle of the
legitimate expectation that a given legal
position would continue if, having
regard to all the relevant circumstances
and especially to the conduct of the
Community institutions, there were
grounds for being absolutely certain
that a specific legal situation would not
be 'altered. But that is out of the
question in these cases as far as the
production levy is concerned. The
Community institutions were right to
stress that the applicants operate in a
field which is technically very closely
connected with the sugar market and
that they knew all about this market
and the rules governing it, especially
those relating to the problem of the
surplus. They therefore had to take into
account the fan that, in such an
economic situation, far-reaching stabi­
lization measures would be adopted and
that the system of financing exports
would also be extended to substitute
products as soon as they arrived on the
market in considerable quantities, and
that by no means the least reason for
this was that an amendment of the rules
relating to quotas and the import regu­
lations for the ACP sugar was not to be
expected before 1980.
For that reason and especially because
the preparatory work in connexion with
the measures has been carried out in
such good time that existing contracts
were scarcely affected by them there
was no occasion to adopt special
transitional measures which might have
frustrated the effen of the rules. If
however isoglucose manufacturers
nevertheless got into unexpected
difficulties that was their own fault,
because when they made their decisions
to invest they did so on the basis of
specific forecasts of the economic trend
— a continuing sugar deficit and rising
prices — which now turn out to be
wrong.
(g) The other argument which has
now still to be dealt with — it also ori­
ginates in the proceedings relating to
the liability of public authorities —
namely that the rules to which
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KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAPVOOR AKKERBOUWPRODUKTEN
exception is taken contravene the right
to carry on a businessfreely, which can
be numbered among the principles
which the Community institutions also
have to observe, is in a certain way
connected with the principle of pro­
portionality which has already been
dealt with. On this point the applicants
once again submit that the production
levy renders the manufacture of
isoglucose impossible, in fact even at the
level of five units of account per 100 kg
which was originally limited to one year
and now applies until 1980. The capital
invested in isoglucose has therefore
been lost; the Community institutions
should in each case have provided for
compensation for this "expropriation".
On this I can first of all only repeat that
it has not been proved that this
economic consequence is inevitable even
if the calculations produced by the
Community institutions have not so far
been acknowledged to be conclusive. It
also appears to be in principle unlikely
— and the conduct of the applicant,
Tunnel Refineries, supports this view —
that transitional rules could give rise to
such a drastic step as the closing down
of a factory.
For the rest the effect of the
apprehended discontinuance of
isoglucose production, if the worst
comes to the worst, is the disappearance
of one branch of the starch manufac­
turing industry so that the existence of
the undertaking concerned as such is
not endangered. But such a state of
affairs can scarcely be said to be an
interference in the business amounting
to expropriation.
By no means the least of the arguments
of the Community institutions in this
connexion is their reminder that
according to the case-law of the Court
(judgment of 14 May 1974 in Case 4/73
J Sold, Kohlen- und Baustoffgroß­
handlung v Commission of the European
Communities [1974] ECR 491) rights
such as those w hich arc asserted in these
cases can be restricted in the public
interest. On this point it must be borne
in mind in these proceedings that the
applicants operate in a field in which
considerations of agricultural policy are
very important and for that reason
freedom of manoeuvre is in any case
very restricted.
I therefore assume that the legality of
the rules upon which judgment has to
be passed cannot be seriously called in
question by relying on the right to carry
on a businessfreely.
(h) It only remains for me to consider
the complaint of a misuse of powers
which the applicants make on the
ground that a set of rules relating to
levies such as those involved in these
cases may only be adopted under Article
40 of the EEC Treaty in connexion with
an organization of the market. But there
is no real organization of the market for
isoglucose, because the advantages to
accrue to isoglucose under Council
Regulation (EEC) No 1111/77 have not
as yet been realized. Furthermore the
rules relating to levies pursue illegal
objectives such as neutralization of the
competition offered by isoglucose and
slowing down its growth, protection of
the sugar industry which is running less
economically and lightening the burden
of the Community budget.
On this point I have already
acknowledged in another connexion
that the advantages which isoglucose
was expected to derive from the organi­
zation of the market are not at the
moment of any real significance.
However that naturally does not mean
that the organization of the market in
isoglucose is mere show. The course
which further development is expected
to take is entirely in foreign trade
although perhaps not so much with
overseas countries as with European
countries bordering on the Community.
I simply recall that the large French
share of isoglucose production has to be
exported because of the prohibition of
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OPINION OF MR REISCHL— CASE 125/77
its use which applies in France. Fur­
thermore, even if the rules relating to
the levies are perhaps seldom applicable
in practice, the rules relating to the
refund, which indeed also apply to
isoglucose in processed products, have
to be borne in mind. I do not therefore
consider that the introduction of a
production levy on isoglucose isinadmissible because there is no real
organization of the market in
isoglucose. Quite apart from that, the
imposition of production levies on sub­
stitute products under Article 43 of the
EEC Treaty can in any case be
regarded as lawful, if a corresponding
levy within the framework of an organi­
zation of a market — in these casesthe
organization of the market in sugar —
is imposed on agricultural processed
products.
As for the rest nothing has come to
light to show that the real aim of the
rules is only the neutralization of the
competition offered by isoglucose and
the protection of the sugar industry. As
we have been shown the rules aim — in
order to avoid discrimination against
sugar — at nothing else but the
extension of the rules on contributions
applicable to this product to substitute
products which have considerable
importance on the market. If however
in this connexion the aim of slowing
down the growth of isoglucose in the
interest of stabilizing the market has
played a pan — the Community
institutions refer specifically to this in
answers to Parliamentary questions —
this would be just as lawful as the other
subsdiary concern, namely to proteo
the Community budget from burdens
which are too heavy.
I therefore find that there is no basisfor
the complaint that there has been a
misuseof powers.
(i) All things considered it therefore
emerges that there are no grounds for
legitimate doubts as to the validity of
the rules governing the levies on
isoglucose and that there is
consequently no reason to assume that
Council Regulation (EEC) No 1110/77
and Council Regulation (EEC) No
1111/77 are invalid and that the
provisions adopted by the Commission
for their implementation, in respect of
which specific arguments have not been
submitted during the proceedings, are
also invalid.
I therefore submit that the questions referred for a preliminary ruling be
answered as follows:
1. During the proceedings no reasons have become apparent which might
justify the assumption that Council Regulation (EEC) No 1862/76 in so
far as it has added an Article 5 (a) to Regulation (EEC) No 2742/75 of
the Council and Council Regulations (EEC) No 1110/77 and (EEC) No
1111/77 are invalid.
2. Article 4 of Commission Regulation (EEC) No 2158/76 is to be
interpreted as meaning that it also applies to the recovery of refunds,
which have been granted in respect of the production during the period
from 1 August to 3 September 1976 of glucose having a high fructose
content.
2034