61984CC0253_EN
Opinion of the Advocate-General
Opinion of the Advocate-General
++++
My Lords,
On 31 March 1984 the Council, having regard in particular to Articles 42 and 43 of the EEC Treaty, on a proposal from the Commission and after the opinion of the Parliament and the Economic and Social Committee had been obtained, adopted Regulation No 855/84 on the calculation and the dismantlement of the monetary compensatory amounts applying to certain agricultural products ( Official Journal 1984, L*90, p.*1 ). Positive monetary compensatory amounts ( MCAs ) which applied in Member States with strong currencies, in particular the Federal Republic of Germany, were to be progressively dismantled . The Federal Republic, however, was to be allowed to grant its farmers aid to offset the loss of income which would result from the ensuing reduction in prices expressed in national currencies ( the 13th recital to the regulation ).
By Article 3 such special aid granted in accordance with the regulation was to be deemed to be compatible with the common market and in paragraph 2 thereof "The Federal Republic of Germany shall be authorized to grant separately the special aid by payment mentioned in the invoicing and/or the VAT declaration using the VAT as an instrument . The aid may not exceed 3% of the ex-VAT price paid by the purchaser for the agricultural product ".
Article 4 of the regulation provides for the Community' s contribution to the special aid thus authorized .
The Commission and the Council undertook respectively to propose and to adopt a directive modifying the Sixth Directive on VAT so as to permit that to be used as an instrument for granting the aid .
In May the Federal Republic asked for the aid to be increased to 5% and to be effective from 1 July 1984 . The Commission was not willing to increase the amount, though sympathetic to the request to change the date .
On 25 and 26 June 1984 the European Council meeting at Fontainebleau agreed that the Commission should be asked to propose and the Council to adopt measures to enable the Federal Republic to raise the maximum rate of that relief from 3 to 5% from 1 July 1984 to 31 December 1988 . The Commission took the view that this was a matter for the Council, since apparently it was not prepared to depart from the 3% figure, and on 30 June 1984 the Council adopted Decision 84/361 ( Official Journal 1984, L*185, p.*41 ). This recites the authorization of aid under Regulation No 855/84 and the limit to 3% of the ex-VAT price paid by the purchaser for the agricultural product; it continues :
"Whereas this limit has proved insufficient in view of the particular difficulties encountered by German agriculture; whereas, in this exceptional situation, exceeding this limit shall be deemed to be compatible with the common market;
Whereas, however, the compensation thus granted should not exceed the effects arising out of the dismantling of monetary compensatory amounts ."
Accordingly, Article 1 provides :
"For the period 1 July 1984 to 31 December 1988 the aid granted by the Federal Republic of Germany in the form of VAT relief shall be deemed to be compatible with the common market up to a maximum of 5% of the ex-VAT price paid by the purchaser for the agricultural product ."
The decision refers to the EEC Treaty and in particular the third subparagraph of Article 93 ( 2 ) thereof as its legal basis, but no mention is made of a proposal by the Commission or of the Parliament having been consulted; nor is there a specific mention of Articles 42 or 43 of the EEC Treaty .
Despite criticism from the European Parliament on the basis of the report of its Committee on Economic and Monetary Affairs and Industrial Policy, the Council, following a proposal from the Commission, on 16 July 1985 adopted the 20th Directive on the harmonization of the laws of the Member States relating to turnover taxes - Common system of value-added tax : derogations in connection with the special aids granted to certain farmers to compensate for the dismantlement of monetary compensatory amounts applying to certain agricultural products, Directive 85/361/EEC ( Official Journal 1985, L*192, p.*18 ). Article 1 of that directive provides that, by way of derogation from Directive 77/388/EEC ( i.e . the Sixth VAT Directive ) ( Official Journal 1977, L*145, p.*1 ), the Federal Republic is authorized to use value-added tax in order to grant the special aid permitted in Regulation No 855/84 and Decision 84/361 .
Article 2 provides :
"1 . Value-added tax may be used as an instrument to grant the aid only within the limit of 3% authorized in Article 3 of Regulation ( EEC ) No 855/84 .
2 . However, in accordance with Decision 84/361/EEC, the percentage referred to in paragraph 1 may be increased up to 5% until 31 December 1988 ."
By Article 7 the directive is to be applicable "with effect from 1 July 1984 until 31 December 1991 at the latest ".
Thus, although no dates were specified in Article 3 of Regulation No 855/84, the effect of that regulation taken with Decision 84/361 and the 20th VAT Directive is that aid at a maximum rate of 5% is authorized as from 1 July 1984 to 31 December 1988, and at a maximum rate of 3% from 1 January 1989 to 31 December 1991 at the latest .
By an application lodged on 29 October 1984 the Groupement agricole d' exploitation en commun de la Ségaude (" GAEC "), a French farming company, brought an action against the European Economic Community represented by the Council and the Commission . It asked the Court to "declare that the European Economic Community is liable in accordance with Articles 178 and 215 of the EEC Treaty for the damage sustained by the applicant as a result of the Council' s adoption of Decision 84/361 ". It claimed a provisional sum of FF*60*000 with interest and further damages "as and when such amounts can be calculated ".
The French Fédération nationale des syndicats d' exploitants agricoles (" FNSEA "), which is an organization claiming to represent the great majority of French farmers, has intervened in support of GAEC; the Federal Republic of Germany has intervened in support of the defendants .
The Commission, whilst contending that the decision was valid, objects that the claim against the Commission is inadmissible . Relying on paragraph 7 of the judgment in Joined Cases 63 to 69/72 Werhahn v Council (( 1973 )) ECR 1229 at p.*1247, it submits that the Council is the only proper defendant in the present case as being the institution which alone adopted the measure alleged to be at the origin of the damage claimed and against which alone, if at all, a claim for damages can arise . In my opinion this objection should be upheld . On the basis that the Community "should be represented before the Court by the institution or institutions against which the matter giving rise to liability is alleged" ( Werhahn, supra, paragraph 7 ) the Council is the only such institution and the only proper defendant to the present action which in my view should be dismissed as inadmissible in so far as it is brought against the Commission .
GAEC' s case is that it produces beef, veal, poultry and milk and that sales of its products have been adversely affected as a direct result of the aid granted to farmers in the Federal Republic of Germany authorized by Council Decision 84/361 . According to GAEC' s application that decision is unlawful for four reasons :
( 1 ) it was adopted in breach of the rules of procedure laid down in the Treaty of Rome in that it was based on Article 93 ( 2 ) thereof;
( 2 ) it infringes the principle of non-discrimination laid down in the second subparagraph of Article 40 ( 3 ) of the Treaty;
( 3 ) it infringes the Sixth VAT Directive;
( 4 ) it infringes Article 96 of the EEC Treaty which prohibits the subsidizing of exports by repayment of internal taxes .
According to GAEC' s reply, Decision 84/361 is unlawful for three further reasons :
( 1 ) failure on the part of the Commission to follow the procedure laid down in the first subparagraph of Article 93 ( 2 ) of the EEC Treaty in particular by failing to give notice to the parties concerned;
( 2 ) breach of the principle of proportionality;
( 3 ) failure to protect the Community' s own resources .
The Council and the Commission contest the admissibility of the last three grounds as being fresh issues forbidden by Article 42 ( 2 ) of the Rules of Procedure .
In respect of all these matters complex and detailed arguments have been advanced, both of law and fact, with which I must deal, though in the end the case could in my opinion be dealt with on one or other of two short points .
As regards the alleged wrongful use of Article 93 ( 2 ) of the EEC Treaty as the basis for Decision 84/361, GAEC, supported by FNSEA, alleges that Decision 84/361 is unlawful for failure to comply with procedural requirements . It submits that the Council chose to use the procedure laid down in Article 93 ( 2 ) of the EEC Treaty, despite the fact that the aid authorized had an effect on agricultural and VAT provisions which, pursuant respectively to Articles 42 and 43 and 99 and 100 of the EEC Treaty, the Council is not entitled to adopt or to alter except on a proposal from the Commission and after consulting the European Parliament . Moreover, it claims that the dismantling of monetary compensatory amounts under Regulation No 855/84 did not constitute an "exceptional circumstance" within the meaning of Article 93 ( 2 ) of the EEC Treaty .
Article 93 ( 2 ) in the third paragraph provides :
"On application by a Member State, the Council may, acting unanimously, decide that aid which that State is granting or intends to grant shall be considered to be compatible with the common market, in derogation from the provisions of Article 92 or from the regulations provided for in Article 94, if such a decision is justified by exceptional circumstances ."
Decision 84/361, by allowing a nationally financed aid in the agricultural sector, which is to operate through the instrument of VAT, derogates from the normal principles of the common organization of the agricultural markets and of the VAT system . The question therefore arises whether the third subparagraph of Article 93 ( 2 ) can constitute an adequate legal basis for that measure .
Article 93 ( 2 ), among other provisions concerning State aids, is incorporated in the common organization of the market for beef and veal by Article 24 of Regulation No 805/68 ( Official Journal, English Special Edition 1968 ( I ), p.*187 ), in the common organization of the market for milk products by Articles 23 and 24 of Regulation No 804/68 ( Official Journal, English Special Edition 1968 ( I ), p.*176 ), and in the common organization of the market for poultrymeat by Article 19 of Regulation No 2777/75 ( Official Journal 1975, L*282, p.*77 ). It seems to me to follow that it is available as a basis for a measure derogating from the provisions on the common organization of those markets . In these circumstances I do not consider that it is right to say that the step taken in Decision 84/361 had to follow the procedures of and be taken under Articles 42 and 43 of the EEC Treaty . Nor do I think, as a matter of law, even if it is said to be surprising that it should be done in the way it was done, that because Regulation No 855/84 was based on Articles 42 and 43 with the concomitant need for a Commission proposal and consultation of the Parliament, that the Council was thereby deprived of its power under the third subparagraph of Article 93 ( 2 ) and that it was obliged to adopt a procedure involving such a proposal and consultation .
On the other hand, I am not satisfied that the first sentence of the third subparagraph of Article 93 ( 2 ) of the EEC Treaty can serve as an adequate basis for the derogation which Decision 84/361 involves from the VAT provisions . No doubt recognizing this difficulty the Council agreed at the outset to, and has since adopted, the 20th VAT Directive, which expressly states that the use of value-added tax in order to grant the special aid permitted in Decision 84/361 is authorized "by way of derogation from" the Sixth VAT Directive . Although the directive was adopted on 16 July 1985, Article 7 provides that it "shall be applicable with effect from 1 July 1984 ". In spite of this element of retroactivity, the directive is to be presumed valid in these proceedings, its legality not being put at issue . It thus provides the necessary derogation from the normal VAT rules, and in this respect remedies the defect in the legal basis used for Decision 84/361 .
Was, however, the decision justified by "exceptional circumstances" within the meaning of Article 93 ( 2 )? The third recital to Decision 84/361 refers to an "exceptional situation", but the Council has made it clear that the exceptional situation relied on is the fact that the loss of income to German farmers due to the dismantling of positive MCAs was higher than the 3% VAT limit originally set by Regulation No 855/84, and nothing else . As I read them the German Government' s observations confirm that statement .
It can be argued that the dismantling of positive MCAs ( which allow a country to have both a strong currency and relatively cheap exports ) was merely a return to normal market conditions and that it cannot be an "exceptional circumstance" within the meaning of Article 93 ( 2 ) of the Treaty . I would not myself accept this as a general proposition . Positive MCAs have been in existence for a long time and if it is shown that their removal led or was likely to lead to sufficiently severe and disruptive consequences, that may constitute an exceptional circumstance justifying action by the Council .
Was that the position here? It is common ground in this case that the dismantling of positive MCAs did bring about a loss of income for German farmers, but much argument was devoted to the question of how great that loss was . According to a Commission estimate, a 1% revaluation of the green rate of the German mark represents an annual loss for German agriculture of approximately DM*450*million . Since a revaluation of 5% of the green rate for the German mark was concerned, the Commission estimated the loss for German agriculture at 5 x 450* million = DM*2*250*million per year . According to an estimate agreed between the Commission and the German authorities, aid of 1% of VAT amounted to approximately DM*600*million per year for German agriculture . On that figure the rate of VAT rebate required to cover the loss of DM*2*250*million would have been 3.75 %. A rate of 5% works out at a total annual aid of approximately DM*3*000*million, i.e . DM*750*million in excess of the estimated loss, whereas the 3% limit originally fixed produces a refund of 1*800*million or 450*million short of the estimated loss . Thus under Regulation No 855/84 German farmers were already recovering 80% of their loss of income due to the dismantling of positive MCAs . It might still of course constitute a substantial loss for individual farmers but I am not satisfied that, when the original Regulation 855/84 giving the higher proportion of aid could be made under Articles 42 and 43 of the Treaty, the discovery of this likely shortfall constituted an exceptional circumstance for the purpose of Article 93 ( 2 ), third paragraph . I consider, therefore, that Decision 84/361 is not unlawful simply because it is based on the third subparagraph of Article 93 ( 2 ) of the EEC Treaty, but is ultra vires because it has not been shown to be justified by "exceptional circumstances" as required by that provision .
The question remains whether this illegality is of any avail to the applicant in the present case . The Court has consistently stated that the Community does not incur liability on account of a legislative measure which involves choices of economic policy unless a sufficiently serious breach of a superior rule of law for the protection of the individual has occurred : Joined Cases 83 and 94/76, 4, 15 and 40/77 Bayerische HNL v Council and Commission (( 1978 )) ECR 1209 at p.*1224 . I do not consider that the third paragraph of Article 93 ( 2 ) of the EEC Treaty constitutes such a superior rule of law for the protection of the individual within the meaning of the Court' s judgment . The applicant on that basis fails in its submissions on the first ground of illegality .
The second alleged ground of illegality is that there has been in Decision 84/361 discrimination contrary to the second subparagraph of Article 40 ( 3 ) of the EEC Treaty . GAEC submits that the aid authorized goes beyond mere compensation for the dismantling of monetary compensatory amounts because an aid of 5% considerably exceeds the effects of the dismantlement of MCAs which would only justify an aid between 3 and 4%, and they adopt a figure of 3.75% which they say was initially suggested by the Commission . Secondly, the aid is granted for all products including those not covered by MCAs . Thirdly, GAEC submits that the contested aid begins on 1 July 1984 whereas the dismantling of MCAs only begins on 1 January 1985, so that for six months the aid overlaps with the advantage provided by MCAs .
The Council points out that the dismantling of positive MCAs was to be carried out in three stages :
( i ) a reduction of 3% in the German MCAs on 1 April 1984,
( ii ) a further reduction of 5% in the amount of the German MCAs on 1 January 1985, and
( iii ) the complete abolition of the remaining German MCAs by the beginning of the 1987/88 marketing year at the latest .
The first stage was also to comprise the abolition of negative MCAs by means of devaluing the relevant green currencies . The effect of this first stage on prices of milk in national currency ( as opposed to ECU ) was that the price in German marks remained unchanged, whereas the price in French francs rose by approximately 6%; the effect of the first stage on prices of beef was that in German marks they fell by 1%, whereas in French francs they rose by 4.8 %. The result, contends the Council, was that the first stage in the dismantling of monetary compensatory amounts had already led to substantial losses of income for German farmers for certain important products . The Council contends that the figure of 3.75% does not take account of the effects of the first stage in the dismantling of MCAs with effect from 1 April 1984 along with the drop in the ECU support prices for certain important sectors of German agriculture; GAEC' s reasoning ignores the corresponding drop in the German monetary compensatory amount following the first (- 3 %) and the second (- 5 %) stages of the dismantling of the German MCAs . That drop of 8% is in any event greater than the maximum aid of 5 %. In its rejoinder, however, the Council revealed that the German Government' s estimation of the necessary compensation also took in account the effects of unrelated restrictive measures taken at the same time, such as the imposition of milk quotas which were in no way specific to the Federal Republic but had to be borne by farmers throughout the Community . The figures given in the Council' s rejoinder tend to show that the loss alleged to have been suffered by German farmers as a result of the dismantling of their MCAs was only DM*2*200*million whereas a maximum aid of 5% of VAT can reach some DM*2*600*million, i.e . DM*400*million more . Hence in its rejoinder the Council confines itself to asserting that the 3% aid allowed by Regulation No 855/84 was clearly not enough to compensate fully for the loss of revenue, so that the Council did not act arbitrarily in authorizing a maximum aid of 5% in Decision 84/361 .
The Federal Republic of Germany asserts that losses of income by German farmers were way above that compensable by a 3% reduction in VAT and that there existed losses between 15 and 20 %.
There is no real evidence before the Court to substantiate the latter figures . It seems clear from the Council' s rejoinder that certain estimates put forward by the German authorities for a drop in income on the part of their farmers include elements unrelated to the dismantling of MCAs, such as the effect of the imposition of milk quotas, which is not only a separate matter but one which applied to all the other Member States as well . Even the Council admits a figure "of the order of magnitude of DM*2*200*million" as representing the drop in income due to the dismantling of MCAs alone . On the other hand, the Council has advanced a figure of DM*2*600*million as the maximum that the special aid can amount to at 5% of VAT, whereas according to the Commission' s first report on the operation of the aid mechanism, the Commission and the German authorities were agreed upon an estimate of DM*3*000*million . Both figures are estimates, and the Commission states in the conclusions to its report on the operation of the aid mechanism in 1984 that it is at present impossible to compare the special aid with the losses suffered as a result of the revaluation of the green rate of the German mark . Whether DM*2*600*million or 3*000*million is the better estimate, it is common ground that aid at the maximum rate of 5% of VAT is likely to have exceeded the actual drop in income suffered by German farmers as a result of the dismantling of MCAs .
It is therefore material to know whether any steps were taken to contain the aid within the limit of the actual drop in income . The fourth recital to Decision 84/361 provides that "the compensation thus granted should not exceed the effects arising out of the dismantling of monetary compensatory amounts", though there is no article in the decision to give effect to that intention . Furthermore, the German Law of 29 June 1984 amending the Law on Turnover Taxes ( Bundesgesetzblatt 1984 I, p . 796 ), which provided for payment of this special aid, contains no provision to prevent overcompensation to German farmers . At the hearing, the Council indicated that it had provided no machinery to prevent such overcompensation, and the Federal Republic confirmed that it had paid the full 5% without any machinery or any attempt to prevent overcompensation . In my opinion, the mere report by the Commission on the aid mechanism required by Article 4 of the 20th VAT Directive is insufficient to prevent overcompensation; and it appears from Article 5 that the only corrective with which that Directive is concerned regards the maintenance of the level of the Community' s own resources . Although the first report on the operation of the aid mechanism is unable to provide a definite comparison, the probability appears to be that some, if not all, German farmers have been and are being overcompensated, contrary to the intention expressed in the fourth recital to Decision 84/361 . On this basis there was in my view discrimination contrary to the second subparagraph of Article 40 ( 3 ) of the EEC Treaty .
The second argument in this context, that there is overcompensation as regards the products for which the special aid is granted, is not open to the applicant in the present case because it is claiming damages only in relation to products which are covered by MCAs, namely poultry, milk products, beef and veal .
The third contention is that there is overcompensation in that the special aid was authorized to begin on 1 July 1984, whereas the monetary measures came into effect on 1 January 1985 .
The principal justification for taking the earlier date is said to be that since the trade knew from 1 April 1984 ( the date when Regulation No 855/84 was published ) that prices in national currency would fall as from 1 January 1985, those lower prices began to be applied after 1 April 1984 . Undertakings usually buying agricultural products either used up their stocks, waiting for January 1985, or they were only prepared to buy at lower prices . In either way it is said that prices were likely to fall . As a matter of market economics this may sound likely, but it does not follow that prices were bound to start falling as early as July and there is really no evidence to show that 1 July was taken on the basis of any statistical appraisal . It is true, as the Federal Republic points out, that 1 January is in the middle of the marketing year, which begins on 1 July of the previous year, but this does not mean that prices will necessarily fall at the beginning of the marketing year . The Commission indeed seems to have considered that the new trends would be likely to take effect in September or October . The figures given to the Court do not show a consistent fall as from 1 July 1984 . The price in German marks for poultry in the Federal Republic showed a downward trend ( approximately 2 %) in the second half of 1984, but after that the prices picked up . As regards beef there was indeed a distinct drop ( approximately 7 %) in prices in the Federal Republic in German marks for the months from July to September inclusive, but in October the prices rose again ( approximately 2 %). Unfortunately, there were no figures for November and December for beef . As regards milk, the producer price in the Federal Republic in German marks did not show a fall at all in the second half of 1984 but a steady rise ( approximately 3 %), although it did fall thereafter .
However, I do not think that it is right to judge the matter with hindsight, especially as other factors may have influenced what happened - as with beef prices, where the increased slaughter of cows due to the imposition of milk quotas may have been a factor .
The real question is whether, when the decision was adopted, it could reasonably have been anticipated that prices would fall and losses be suffered on 1 July 1984 by reason of the measures to come into effect on 1 January 1985 . For this purpose it is not in my view relevant to have regard to the effect of prices resulting from the first stage of dismantling MCAs which did not, as I understand it, affect the green rate of the German mark, or of the lowering by 1% of the ECU price for certain products, both of which took place on 1 April 1984 . Moreover, although the assessment of likely effect involves an economic appraisal rather than a precise arithmetical analysis, so that the Court is normally reluctant to interfere, some basis for taking 1 July 1984 has to be indicated . Save that it is the beginning of the marketing year, which may have been a convenient date to take, no real basis for 1 July 1984 has been in my view shown . September ( the date taken for the new rate for sugarbeet and potatoes in Regulation No 2677/84 ( Official Journal 1984, L*253, p.*31 )) or October seem at least as likely, perhaps more likely, dates when prices might be expected to reflect what was to happen in January .
On the evidence it seems to me that it has not been shown that 1 July 1984 was reasonably justified as a commencement date and that accordingly there was a further breach of the prohibition on discrimination set out in Article 40 ( 3 ) of the EEC Treaty by reason of the overcompensation of German farmers .
The Council submits that that discrimination, even if made out, would not affect a limited and clearly defined group of commercial operators, as is required in order to give rise to liability in damages on the part of the Community : Case 238/78 Ireks-Arkady v Council and Commission (( 1979 )) ECR 2955 at p.*2973 . The Federal Republic of Germany adds that GAEC has not shown that it has been injured in a particularly serious way by Decision 84/361 but has merely alleged a general distortion of competition, and that is not enough .
In Case 238/78, in finding that there had been on the part of the Council a grave and manifest disregard of the limits of the exercise of its discretionary powers, the Court underlined the importance of the principle of equality embodied in Article 40 ( 3 ), the fact that the disregard of that principle affected a limited and clearly defined group of commercial operators and the fact that the damage alleged went beyond the bounds of the economic risks inherent in the activities in the sector concerned . Although these last two were not in that case said to be necessary preconditions of entitlement to damages, they have been regarded as so being .
In the present case, even if GAEC substantiates all the allegations which it makes, it does not prove, or even allege, that it is part of a limited and clearly defined group of commercial operators . On the contrary, even if proved, damage of the kind alleged by GAEC would be such as to affect all farming undertakings in all Member States which are in competition with German farmers . The FNSEA itself asserts that the measures in question cause substantial damage "non seulement au requérant ..., mais aussi à l' ensemble du monde agricole français que représente l' intervenante ".
As regards the question whether the damage alleged goes beyond the bounds of the economic risks inherent in the activities in the sector concerned, in this case the applicant has been unable to particularize its alleged losses on poultry and milk and it estimates its loss on beef and veal in the second half of 1984 at FF*10*894 . That represents 5.6% of its total sales of beef and veal in the second half of 1984 . Such a loss of FF*10*894 is only 0.5% of the figure for assets given in its balance sheet for 1984, namely FF*2*374*876.97 . These figures themselves do not indicate a loss going beyond the risks inherent in farming .
The applicant has relied on statistics of market prices . I do not think that the milk and poultry statistics assist it . The statistics for beef show that prices were dropping throughout 1984 on both the German and the French markets . There was a particularly sharp drop in April and July in the Federal Republic . There was a sharp drop in France in July but prices rose again to some extent in September and October . The German Government has submitted, on the basis of figures which it derives from Eurostat, that there is no relation between the German market price and the French market price for beef . It may be true that there is no relation between the two markets as such, but the Federal Republic exports significant quantities of beef and veal to France ( 86*157 tonnes in 1984 ) which may exert an influence on French domestic prices . The price of hindquarters thus exported fell from FF*22.07 per kilo in June 1984 to FF*19.76 per kilo over the following two months, a fall of 10.5 %. The applicant argues first that this can only be explained by the impact of the special aid granted under Decision 84/361; second, that it immediately brought about a fall of 3.5% in French market prices for beef in July and August 1984 .
According to the figures before the Court, in July and August exports of beef from the Federal Republic to France were, respectively, 17% and 14% up on the previous year, but for the rest of the year they declined and were down on the preceding year . In 1984 as a whole German exports of beef to France were only 3% ( 2*800 tonnes ) up on the preceding year . Thus there was an increase in exports from the Federal Republic to France, which is consistent with the applicant' s arguments about the price trends; but that increase was confined to two months of the year; if the whole year is taken the volume of exports remains little changed . I would myself accept that German exports were probably a cause of the drop in French domestic prices for beef for the two months of July and August 1984 and it is accepted that prices recovered on the French market in September and October 1984 . The German Government says that the aid paid to German farmers under Decision 84/361 was not passed on in the market prices and thus was not reflected in GAEC' s trading results . I do not see that this is established, but equally it is not shown that the drop in the price of hindquarters of beef exported from the Federal Republic to France in July and August 1984 was due to the element of overcompensation paid to German farmers under Decision 84/361, particularly as the applicant is not challenging the first 3% of the aid paid under Regulation No 855/84 . However, even assuming that the element of overcompensatiuon paid to German farmers under Decision 84/361 caused the fall in the price of hindquarters of beef exported from the Federal Republic to France in July and August 1984, I am not satisfied that a fall in market prices of 3.5% over a period of two months indicates a loss which "goes beyond the bounds of the economic risks inherent in the activities of" the beef and veal sector . Accordingly, I do not think that a finding to that effect, such as was made in Ireks-Arkady, can be made in the present case . Accordingly, I do not consider that the discrimination established grounds an action in damages at the suit of the applicant .
The third ground of illegality alleged by the applicant is a breach of the Sixth VAT Directive .
GAEC submits that by using VAT as an instrument to pay the aid in question, Council Decision 84/361 diverts the Sixth VAT Directive from its aims, which are to ensure competitive neutrality between Member States in order to attain convergence of the national VAT systems . It submits in particular that the decision infringes Article 25 ( 3 ) of the Sixth Directive, which lays down a common flat-rate scheme for farmers .
The Commission and the Council and the Federal Republic put forward many arguments to justify what was done . However, in my view it is not necessary to consider these since even if there was a defect, it was remedied by the adoption of the 20th VAT Directive, which did authorize the derogations from the basic VAT rules involved in granting the special aid by way of a VAT rebate made under Regulation No 855/84 and under Decision 84/361 . Therefore, in my view, this ground of illegality cannot be sustained .
There was also some argument by the applicant to the effect that the arrangements applied in the Federal Republic for "flat-rate farmers" under Article 25 of the Sixth VAT Directive already gave such farmers an advantage even before the special aid was granted . That issue, if it is one, is outside the scope of the present proceedings which concern damage allegedly arising from the special aid granted under Decision 84/361 .
The fourth alleged ground of illegality is that the special aid granted under Decision 84/361 constitutes an aid to exports contrary to Article 96 of the EEC Treaty, which provides : "Where products are exported to the territory of any Member State, any repayment of internal taxation shall not exceed the internal taxation imposed on them whether directly or indirectly ". In so far as the 5% aid exceeds in certain cases the VAT actually paid by German farmers, that, it is said, constitutes a repayment of taxation contrary to Article 96, whether or not it was intended as an export subsidy .
The Council contends that this case concerns an income aid intended to make up for a loss of revenue, which is granted at the level of the individual farmer and does not at all apply at the level of exported products, whereas Article 96 is aimed at avoiding disguised export subsidies at the trade level . The Federal Republic of Germany, on the other hand, says that the aid at the level allowed by Decision 84/361 is not a "repayment of internal taxation" or a subsidy on exports from the Federal Republic to France, but a national aid based on a Community law authorization, the validity of which is exclusively governed by the third subparagraph of Article 93 ( 2 ) of the EEC Treaty .
VAT is clearly internal taxation . The special aid provided for by Council Decision 84/361 is paid by way of a VAT refund . Therefore it seems to me that it can be argued that the aid in question is contrary to Article 96 of the EEC Treaty where it is paid in respect of products exported to other Member States in so far as it exceeds the VAT actually paid by the German farmer on those products . However, even if there were, as there is not, clear evidence as to the extent to which the aid has been paid in respect of exported products, this claim fails because in my view Article 96 is not a superior rule of law for the protection of the individual and, even if infringed, could not found a claim for damages by the applicant in the present case .
The fifth, sixth and seventh grounds of illegality were only advanced by the applicant in its reply . They therefore constitute "fresh issues" and under Article 42 ( 2 ) of the Rules of Procedure are inadmissible in so far as advanced by the applicant . The sixth ground of illegality ( but not the fifth and seventh ) is also pleaded by the FNSEA in its observations intervening in support of GAEC . The question therefore arises whether an intervener may raise an issue which a party has not raised or at least not raised in due time . It does not seem to me that Article 37 of the Statute of the Court of Justice or Article 93 ( 5 ) of the Rules of Procedure are conclusive of this matter, though the French text of the latter, "ses moyens à l' appui de ses conclusions", can be interpreted as meaning that new grounds may be put forward to support a claim .
That receives support from the judgment in Case 30/59 Steenkolenmijnen v High Authority (( 1961 )) ECR 1, at p.*18, where the Court held that "the intervention procedure would be deprived of all meaning if the intervener were to be denied the use of any argument which had not been used by the party which it supported ". Moreover, it is apparent from the recent Transport Case ( Case 13/83 European Parliament v Council, judgment of 22 May 1985 ) that the Court is prepared to entertain arguments in an intervention which conflict with those of the party in whose support the intervention is made .
I consider therefore that the sixth ground of illegality falls to be considered in this case in so far as it is advanced by the FNSEA, but that the fifth and seventh grounds of illegality advanced by the applicant are not admissible . I deal with them lest the Court considers that all are admissible .
The fifth ground of illegality alleged by the applicant in this case is failure to follow the procedure laid down in Article 93 of the EEC Treaty .
GAEC submits that the Council was not entitled to adopt its decision without first following the procedure laid down in the first subparagraph of Article 93 ( 2 ), in particular by giving notice to the parties concerned to submit their comments . The Commission should thereupon have opened the procedure provided for in the second subparagraph of Article 93 ( 2 ), which it did not do .
On this I accept the argument of the Council and the Commission that the Council' s powers to adopt a decision under the first sentence of the third subparagraph of Article 93 ( 2 ) is independent of the procedures provided for in the first two subparagraphs thereof and that GAEC' s argument is unfounded .
The sixth ground of illegality alleged is a breach of the principle of proportionality .
GAEC, supported by FNSEA, submits that the use of VAT "as an instrument" for the payment of the aid in question breaches the principle of proportionality because VAT is not an appropriate instrument . It is inappropriate for the following reasons :
( i ) aid by means of a reduction in VAT is necessarily of general application and therefore applies to products not covered by MCAs or on which MCAs have only minimal impact;
( ii ) aid granted by means of VAT applies to each commercial transaction between farmers and not to the value-added, so that the farmer' s final production does not reflect the extent of the aid granted;
( iii ) the recipient of the aid may commit frauds by multiplying useless or fictitious transactions between farmers who receive a 5% aid at each stage without any corresponding added value;
( iv ) the aid as laid down will necessarily affect the Community' s own resources;
( v ) the aid in question benefits big farms more than small ones, which accentuates the distortion of competition by making the most efficient farms even more competitive and is contrary to the spirit of the Treaty which aims to ensure a fair standard of living for the agricultural community by channelling aid towards small and medium-sized farms .
Of the five points which it makes in support of this general argument, the first one - to the effect that aid by way of VAT refunds also benefits products not covered by MCAs - is of no assistance to it because it is claiming damages in respect of products which are covered by MCAs . The second and third points - to the effect that the refunds do not reflect added value and may facilitate fraud - may be sound in fact but the rules on VAT in this respect do not exist for the protection of the applicant as an individual . The fourth point - that the aid will affect the Community' s own resources - may have been answered retrospectively by the 20th VAT Directive which, by Articles 3 and 5, appears to make provision to avoid any loss in own resources . In any event, this is again a rule which is not for the protection of the individual . The fifth point - to the effect that the aid grants a disproportionate benefit to big farms, contrary to the aims of the common agricultural policy - encounters the difficulty that the aims of the common agricultural policy are various and it is well established that the Community authorities have a discretion as to how they reconcile those objectives . In any event, those aims are not rules for the protection of the individual such as to found a claim in damages . In the circumstances it does not seem to me that the principle of proportionality as defined by the Court can be relied on by the applicant or that any breach of it has been established .
The seventh ground of illegality advanced concerns the own resources of the EEC . GAEC submits that the 2% increase in the level of the aid brought about by Decision 84/361 does not protect the Community' s own resources .
The Council contends that the authorization to use VAT for the payment of the aid in question was initially granted by Article 3 of Regulation No 855/84, which the applicant has not challenged . Since Decision 84/361 merely confirms the regulation on this point, the Council queries whether the applicant is still in time to raise the point . The Council also contends that it is impossible to see how any drop in the Community' s own resources could bring about arbitrary discrimination against the applicant or cause the applicant the damage claimed .
The 20th VAT Directive seems to me to make provision for the protection of own resources against the effects of aid granted both under Regulation No 855/84 and Decision 84/361 . In any event, the rules and principles governing the own resources of the EEC do not in my opinion constitute rules for the protection of the individual which could be invoked by the applicant to found a claim in damages, and its submission on this point would fail even if it were admissible .
To summarize, I consider that Decision 84/361 is unlawful for breach of Article 93 ( 2 ) of the EEC Treaty and that it may be unlawful in certain circumstances for breach of Article 96 of the EEC Treaty, but I consider that none of those causes of unlawfulness constitutes a breach of a superior rule of law for the protection of the individual so as to give rise to non-contractual liability on the part of the Community . I also consider that Decision 84/361 is unlawful for breach of the principle of equality stated in particular in the second subparagraph of Article 40 ( 3 ) of the EEC Treaty . That is unquestionably a superior rule of law for the protection of the individual but in my opinion, since the damage alleged in so far as specified is said to have been suffered by a very large number of farmers and is in any event within the limits of the risks inherent in the applicant' s economic activity, it has not been shown that there has been a sufficiently serious breach of such a rule to give rise to non-contractual liability on the part of the Community .
On that basis it is not strictly necessary to consider whether the applicant has made out the damage alleged or whether it has demonstrated a causal link between that damage and the legislation impugned . However, I consider that these are important aspects of the case .
On the question of damage, GAEC submits that the injury which it has directly and individually suffered, owing to the increase of the rate of reimbursement granted to German farmers and the effect of that increase on the price per kilo for beef and veal in France, entailed a loss of profit on its sales of livestock of at least 5 %. For the other products of its farm ( poultry and milk ) GAEC did not have figures . In its application, it provisionally estimated its damage for all its products at FF*60*000 for 1984, subject to working out the figures in more detail when the statistics for the second half of 1984 and its own profit and loss account and balance sheet for 1984 were available . The latter became available before the hearing, and in answer to a question by the Court, GAEC calculated its losses on beef and veal in the second half of 1984 at only FF*10*894 but said that it was still unable to provide an estimate for its losses on milk or poultry . It submits that, for the purposes of a damages action before the Court of Justice, it is not necessary that the damage should be definitively quantified; the Court may declare the Community liable for imminent damage foreseeable with sufficient certainty even if the damage cannot be precisely assessed : paragraph 6 of the judgment in Joined Cases 56-60/74 Kampffmeyer v Commission and Council (( 1976 )) ECR 711, at p.*741 .
At the request of the Court, the applicant supplied the balance sheets and documents headed "Compte de pertes et profits" ( Profit and loss account ) for 1982, 1983 and 1984 . The latter, however, only provide totals and no breakdown of the trading results for the year . As regards GAEC' s trading activities, the only figure provided in the profit and loss accounts is the gross trading profit for the year (" Bénéfice d' exploitation de l' exercice "). In 1982 this was FF*196*925.38; in 1983 it was FF*325*630.32 and in 1984 it was only FF*46*977.15 . Thus after a rise in 1983, the gross trading profit seems to have dropped seriously in 1984 . The applicant, however, has not sought to adduce any argument from this fact . It does not claim that the fall in profit is due to lost sales; and its figures for beef sales in the second half of 1984 show volumes similar to those sold in 1982, 1983 and 1985 . Its case is rather that it has suffered from lower profits on sales which it has made .
The Council contends that the applicant has failed to make out any damage in relation to its poultry and milk production so as to satisfy the requirements of Article 38 ( 1 ) of the Rules of Procedure . As regards beef and veal, the applicant' s arguments are weak and result from a calculation of the effect of the German VAT refund on French prices, whereas the depressed prices on the French market can be explained by other factors than the aid in question, such as the application from 1 April 1984 of a super-levy to discourage production in the milk sector with a consequential rise in the slaughter of cows in France and the Federal Republic .
The Federal Republic of Germany argues, in addition, that logically damage flowing from the additional aid cannot be imminent . It must already have happened in the second half of 1984 and cannot be future damage . Invoking economy of procedure, the Federal Republic calls upon the Court to dismiss GAEC' s claim purely on the grounds of absence of damage flowing from the contested act; and it cites paragraphs 9 to 13 of the judgment in Case 40/75 Produits Bertrand v Commission (( 1976 )) ECR 1, at p.*9 as an example of such a proceeding .
In working out its alleged losses on beef and veal sales, the applicant in this case does not refer to specific transactions . It takes its total tonnage of beef sales in different categories and applies to them percentages derived from overall market trends in France . Thus the applicant calculates that prices for beef and veal not eligible for intervention fell in France by 6.6% at the relevant time and prices for beef and veal eligible for intervention fell by 4.5%; it applies those percentages to its total amount of sales in each of those categories in the second half of 1984 . In my view that is not an admissible method for working out losses allegedly suffered . The special aid to German farmers appears to me to have affected beef prices in France at most for only two months out of the six considered . Furthermore, it is far from clear that all of this price decrease can be attributed to the effect of the overcompensation of German farmers under Decision 84/361; other factors may be responsible in whole or in part for the drop in prices . The matter is very speculative, and I do not consider that the applicant in this case has established the damage which it alleges with sufficient certainty . This is even more so with milk and poultry, where, for want of the full price statistics, the applicant has not even attempted to quantify its alleged losses .
In Kampffmeyer the Court held that it could declare the Community liable for "imminent damage foreseeable with sufficient certainty" even if the damage could not yet be precisely assessed . The applicant in this case has produced a profit and loss account for the year 1984 . I can see no reason why it cannot point to specific transactions on which it claims to have suffered losses, if they exist, at least as regards the second half of 1984 . In these circumstances I do not accept that it can invoke the doctrine in paragraph 6 of Kampffmeyer . Furthermore, I do not consider that the damage alleged in the present case is sufficiently certain to come within the Kampffmeyer principle, even if it were future damage . Accordingly, I do not consider the applicant is entitled to the declaration of general liability for damage which it seeks .
As regards the necessary causal link between Decision 84/361 and the alleged damage, GAEC alleges that the aid authorized by Decision 84/361 distorts competition and gives German products an advantage not only on the French market but also on the markets of third countries where they compete with French products, in particular its own products .
The Council contends that the damage alleged by the applicant is not due to Decision 84/361 but to the German national measures adopted pursuant thereto . Thus there is no direct causal link between the decision and the alleged damage, as the decision merely authorizes a Member State to pay the aid .
The German Government' s main submission in this case is that the claim should be rejected for lack of actual, proven damage presenting a causal link with the act challenged . It submits that the drop in the prices of beef invoked by the applicant at the relevant time is attributable to the sudden increase in the slaughtering of cattle consequent upon the Community restrictions on the production of milk . It contends that both the external trade data and the trend of beef and veal prices point against a causal link between the damage alleged and the act challenged, though the Court has not been given evidence to show the extent of such slaughtering or what its effect on prices might have been .
For my part I am not satisfied that a causal link between the unlawfulness alleged and the damage has been established .
I said that these two last questions were important aspects of the case because in my view they in themselves defeat the applicant' s claim, so that on that basis it may not be necessary for the Court to consider the alleged unlawfulness of Decision 84/361, either because the applicant has failed to prove the existence of damage ( as in Case 49/79 Pool v Council (( 1980 )) ECR 569 ) or because it has not made out a causal link between the unlawfulness alleged and the damage ( as in Case 40/75 Produits Bertrand (( 1976 )) ECR 1 and Case 26/81 Oleifici Mediterranei (( 1982 )) ECR 3057 ).
Accordingly, in my opinion the action should be dismissed as inadmissible in so far as it is brought against the Commission and as unfounded in so far as it is brought against the Council . The applicant should be ordered to pay the costs of the Council and the Federal Republic of Germany, but not of the Commission which has not asked for them .