61978C0086
OPINION OF MR ADVOCATE GENERAL MAYRAS
DELIVERED ON 14 DECEMBER 1978 (
1
)
Mr President,
Members of the Court,
I —
Allow me to deliver a single opinion in these two cases: the questions involved are put by the same court, arise from cases between the same parties, have been discussed at the same oral procedure and, finally, relate to the same national system.
It is the first time as far as I know that the Court has been called upon to consider the economic system for alcohol in France. There is nevertheless no question, in the context of the present references for a preliminary ruling, of discussing exhaustively the extremely technical provisions of this system, especially as the French Government has submitted neither written nor oral observations in the second case (119/78).
The management of this system is the responsibility of the Service des Alcools, a body through which the state ‘directly or indirectly supervises, determines or appreciably influences imports or exports between Member States’ (second paragraph of Article 37 (1) of the EEC Treaty). It is a ‘state monopoly of a commercial character’ within the meaning of the first paragraph of Article 37(1).
This system was, and still is, obviously capable of being altered by the provisions of the EEC Treaty.
The monopoly conferred on the State does not include the production of alcohol (unlike the position with regard to tobacco) but the purchase and sale of certain alcohol. In this way production is controlled and regulated. The State itself does not produce ethyl alcohol but requires producers to transfer to it their production subject to certain conditions. In consideration the monopoly pays the producers a price called the ‘delivery’ price based on the average cost price as calculated by the administration for the production of a hectolitre of alcohol.
Certain alcohol is reserved to the State which alone can buy it: this is generally alcohol rectified to a high proof, industrial and synthetic alcohol, alcohol from grapes, apples and pears other than that made for home use or having a registered designation of origin subject to control or regulation. There is thus an obligation to transfer certain alcohol which is not drinkable in the raw state and such obligation is synonymous with a production monopoly.
This system is governed by Article 358 of the Code Général des Impôts [General Tax Code] which goes back to a Law of 13 January 1941 and is one of the provisions relevant for the purposes of the national court which has referred the matter to this Court. It provides: ‘The State, in the capacity of the Service des Alcools, shall be entitled to all ethyl alcohol produced, save:
(1)
spirits not being in the nature of rectified spirits :
(a)
made by or on behalf of home distillers within the permitted limits;
(b)
originating from the distillation of fresh fruit other than apples, pears and grapes or their secondary products;
(c)
which are entitled to a registered designation of origin subject to control or regulation;
(2)
gins …’
The Service des Alcools buys the reserved alcohol, within the limits of certain quotas, at prices fixed by ministerial decree. The monopoly also extends to the sale of the reserved alcohol which the Service des Alcools resells in the raw state or after rectification. The rules relating to the production and transport of alcohol are intended to implement this system and undertakings producing alcohol which may come under the monopoly are subject to inspection by the Contributions Indirectes [Indirect Taxation Department].
Nevertheless by a special decision of the Service des Alcools it is possible freely to dispose of certain alcohol subject to the proviso which I shall mention. I refer in particular to potable spirits having a registered designation of origin subject to control or regulation and spirits produced by the distillation of fresh fruit (apples, pears and grapes) or their secondary products; although there is an obligation to transfer certain alcohol consumable in the new state at a guaranteed price and without the opportunity of repurchase, the marketing of the spirits I have mentioned is free subject to the payment of a cash adjustment.
In addition to the prohibition on importing pure alcohol the French system has a prohibition on distilling ‘any imported raw material’ contained in Article 268 of Annex II of the Code Général des Impôts, an implementing law in the form of a Decree of the Conseil d'Etat No 74/91 of 6 February 1974 (Article 2):
‘Distillation of all imported raw material, with the exception of fresh fruit other than apples, pears or grapes shall be prohibited.’
It is the second provision which concerns the national court.
Let us deal at present with the system of cash adjustment.
Before 1974 the Code allowed no derogation from the requirements contained in Article 358 to transfer the production to the State. Between 1 April 1974 and 29 July 1977 producers were however allowed to avoid the State's monopoly over production and to retain free disposal of certain potable spirits provided they paid a cash adjustment.
The Decree of 6 February 1974 added Article 269 to Annex II of the Code worded as follows :
‘If so requested the Service des Alcools may allow producers freely to dispose of certain alcohol reserved to the State upon payment of a cash adjustment the rate of which may not exceed the difference between the highest sale price of State alcohol and the lowest purchase price of alcohol of agricultural origin produced within the quotas during the previous marketing year …’
As from 29 July 1977 this provision was replaced under the Decree of 25 July 1977 by the following provisions:
‘If so requested the Service des Alcools may allow producers freely to dispose of alcohol reserved to the State upon payment of a cash adjustment the rate of which shall not exceed the difference between the highest sale price of State alcohol and the lowest price of the same alcohol purchased during the previous marketing year. These rules shall also apply to importers of the same alcohol originating in and coming from Member States of the European Economic Community or originating in non-member countries and put into free circulation in one of those Member States.’
Article 2 of the Order of 25 July 1977 laying down the sale prices of alcohol reserved to the state provides:
‘the normal tariffs for the sale of alcohol reserved to the State shall … be made up of a basic price and a supplement equal to the cash adjustment provided for in Article 269 of Annex II to the Code General des Impôts’.
The right to repurchase has thus been extended to all reserved alcohol. Producers of ethyl alcohol may freely dispose without prior authorization of their production upon payment of the cash adjustment. It is apparent that this amendment has been made to take account of the provisions of Article 37 of the EEC Treaty.
II —
The two cases which have given rise to the present reference for a preliminary ruling by the Tribunal de Grande Instance, Lure, have arisen as follows: the Société Anonyme Distilleries Peureux is not a ‘bouilleur de cru’ [distiller for personal consumption]: at Fougerolles it has a large industry mainly concerned with the production of fruit alcohol. It comes under the special system of ‘industrial distilleries of stone fruit and of steeping of stone fruit’. For this purpose it uses raw material of national origin or fruits steeped in alcohol and coming from countries of the Community or other countries.
Peureux at once imports, makes and exports distillates from William pears.
It seems that this product derives its name from the ‘Bon-Chrétien Williams’ variety of dessen fruit tree (fruit requiring the use of a knife) which is obtained in England and has to be grafted on to a maiden tree. The connexion between this fruit and ‘pear spirit’ is not immediately apparent since this drink, unlike perry, is made from sharp rough pears unless the name ‘William pear spirit’ originates from the fact that it is sometimes served with a William pear in it.
In the trade there are the following bottled ‘brands’: William Pear 45o‘La Duchesse’, William Pear ‘Grundbacher’, William Pear 45o‘Klosterwald’, Williamine Pear 43o‘Morand’, a Swiss product.
Pear distillate over 57o is made particularly in Italy. There the distillery of L. Psenner de Termeno (Bolzano) makes and markets the ‘Fine Spirit from William Pears’ at 40o in bottles of 0.75 litres and a ‘distillate from William pears’ at 40o in bottles of 0.50 litres, containing a raw pear.
They are, it seems, simple or colourful designations which, at least in France, have nothing in common with the spirits made from this fruit by traditional household methods in certain eastern areas. In general there is no registered designation of origin in respect of ‘William or William's Pears’ in France. Only certain Alsatian brands come within this category.
In French law the designation ‘pear spirit’ without further qualification is reserved for spirit originating exclusively from the alcoholic fermentation and distillation of this fruit. Such spirit loses all right to the designation when as a result of rectification after the distillation it has lost its specific character. The designation nevertheless applies to the mixture of spirits inter se or with fruit alcohol or industrial alcohol provided the designation used is qualified to distinguish the mixture from the spirit whose designation is used.
There is no Community definition of ‘pear spirit’. Nevertheless according to the Commission's proposal for a regulation on the common organization of the market in ethyl alcohol of agricultural origin laying down additional provisions for ethyl alcohol not of agricultural origin and certain products containing alcohol submitted to the Council on 6 March 1972, spirit from pip fruits is a spirit obtained exclusively by distillation of the fermented musts of those fruits having on leaving the distillation apparatus a maximum of 80o G.L. and satisfying the requirements set out in the list of specifications. This definition was not repeated in the amended proposal for a regulation on the common organization or the market in ethyl alcohol of agricultural origin and laying down additional provisions for certain products containing ethyl alcohol submitted to the Council on 7 December 1976.
In 1976 moreover, the Peureux company distilled ‘oranges preserved in alcohol’ imported from Italy and falling within heading 20.06 B I of the Common Customs Tariff. I do not know in what form or under what name this was to be marketed: according to the observations of Peureux, it intended to obtain a liqueur ‘similar to Cointreau’. As the Court is aware, the true Cointreau is made at Angers. After inquiring of the relevant revenue department (Administration des Contributions Indirectes) to confirm its right to use this description, the latter replied on 1 March 1977 that the provisions of Article 268 of Annex II to the Code Général des Impôts prevented distillation of the substance on the national territory. Since on the basis of such distillation there was claimed from it an amount equal to ten times the unpaid duty (that is more than 17 million francs) Peureux applied to the Tribunal de Grande Instance, Lure, to annul the administration's decision.
Passing, as one might say, to the counteroffensive Peureux has claimed from the French administration the refund of a sum total of 399435 francs which it paid between 5 February 1970 and 6 October 1976 as the cash adjustment payable on the distillation of Williams pear spirits which it had made and in respect of which it had asked for and received authorization for free disposal.
After finding that the plaintiff's claim in respect of sums paid before 31 December 1974 was barred, the Tribunal de Grande Instance, Lure, referred the following question to the Court ‘Is the existence of the French State monopoly for the production of certain potable spirits such as that distilled from Williams pears, involving the levy by the State of a resale adjustment [“soulte de rétrocession”] where the sale of such spirits is entrusted to the producer, compatible since 1 January 1975 or subsequently with the provisions of Article 37 of the Treaty of Rome prohibiting any discrimination between nationals of Member States of the European Economic Community in respect of imports and exports?” (Case 86/78).
The same court asks you in Case 119/78: “Is the prohibition in France on the distillation of spirits from any imported raw material, with the exception of fresh fruit other than apples, pears and grapes (Article 268 of Annex II to the Code Général des Impôts), compatible with Articles 10 or 37 or any other provision of the Treaty of Rome on the free movement and circulation of products coming from third countries, in particular as regards the distillation of spirits from oranges steeped in alcohol coming from Italy?”
It should further be observed in regard to these two questions:
(1)
That, on 19 April 1978 in reply to a written question the Commission stated that the rules contained in Decree No 77/842 of 25 July 1977 (which moreover remained to be confirmed by legislative measures) were still being examined. I do not know what stage this examination has reached;
(2)
In December 1977 the prohibition on the distillation of oranges steeped in alcohol was the subject of observations by the Commission to the effect that in the absence of a satisfactory reply from the French Government the Commission would in the spring of this year initiate the procedure provided for in Article 169 of the Treaty. In its oral observations the Commission referred to the fact that in a letter of 2 October 1978 the French authorities showed themselves conscious of the necessity of making the appropriate adjustments of a legislative nature to the relevant rules and that a draft law was being prepared.
III —
Before considering the effect of Article 37 of the EEC Treaty on the French rules giving rise to an obligation to transfer production to the monopoly, the consideration for the release of such obligation constituted by the cash adjustment and the prohibition on distilling any imponed raw material save fresh fruit other than apples, pears and grapes, it is fitting to inquire whether this provision of the Treaty prohibits what is called “discrimination in reverse”, since the plaintiff in the main action complains in the first case that it is the victim of such discrimination and also questions whether Article 37 still applies in regard to situations such as that with which the national court is concerned in the two cases.
1.
Within the scope of the Treaty, and without prejudice to any special provisions contained therein, Article 7 prohibits any discrimination on grounds of nationality.
The question accordingly arises whether the Treaty prohibits in a general way what is called “discrimination in reverse”.
The Court had occasion to define its attitude to this question in relation to social security. In the judgment in Kenny of 28 June 1978, it ruled: (paragraph 18) “By prohibiting every Member State from applying its law differently on the ground of nationality, within the field of application of the Treaty, Articles 7 and 48 are not concerned with any disparities in treatment which may result, between Member States, from divergences existing between the laws of the various Member States, so long as the latter affect all persons subject to them in accordance with objective criteria and without regard to their nationality”.
I myself took the view in my opinion in the Thieffry case [1977] ECR 765 at p. 780 that in regard to freedom of establishment Article 52 of the Treaty was incompatible with the existence of such discrimination and Mr Advocate General Reischl (Case 115/78 Knoors) and Mr Advocate General Warner (Case 136/78 Auer) the day before yesterday took the same view.
In the sphere with which the national court is concerned the prohibition in Article 7 is given concrete form by the provisions of Article 37 (1) and again by Article 95. Regarding Article 37 (2) Mr Advocate General Dutheillet de Lamothe took the view in his opinion in the Cinzano case ([1970] 2 ECR 1089 at p. 1104) that this provision “although prohibiting any new discriminatory measure against importers, does not prevent the elimination of discrimination which exists to the detriment of domestic producers”.
For his part Mr Advocate General Warner in his opinion in the Manghera case ([1976] 1 ECR 91 at p. 107) took the view that having regard to the place of Article 37 in the chapter dealing with the elimination of quantitative restrictions on trade, the discrimination with which Article 37 is concerned “must be discrimination against goods produced or marketed by nationals of other Member States”.
Regarding Article 95 the Court decided in the judgment of 22 March 1977 in the Steimke case: “The objective of Article 95 is to abolish direct or indirect discrimination against imported products but not to place them in a privileged tax position in relation to domestic products” ([1977] ECR 595, paragraph 30, at p. 613).
For my part I am inclined to think that having regard to the words “no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of Member States” Article 37 is aimed at discrimination by reason of geographical locality of the production whatever the nationality of the product. Discrimination due to the origin of the products is no less open to criticism than discrimination due to the nationality of the person concerned. Even if it can be described as “purely national” the discrimination is not wholly unconnected with factors operative in another Member State. It comes thus within a Community context. I would at once add however that the disappearance of discrimination in reverse will be attained only in the context of a common organization of the markets or by approximation or harmonization of the laws.
2. Let me now deal with the question whether Article 37 still applies.
In its written observations the Commission argues, as it has already done in the Hansen case ([1978] ECR 1787), on which you gave a ruling in your judgment of 10 October 1978, and as it is doing in Case 91/78, another Hansen case, on which you will be ruling shortly, that since the end of the EEC transitional period it is no longer Article 37 which applies as regards all the measures not relative to the exclusive rights of monopolies but Articles 12, 30 to 34, 95 and if necessary 92. Alternatively it maintains that Article 37 no longer applies because the French system, if still constituting a production monopoly, must be regarded as adjusted and no longer constitutes a commercial monopoly within the meaning of that article as a result of Decree No 77/842 of 25 July 1977. Only the right to produce alcohol remains subject to the monopoly as long as it is compatibile with the principle of the free movement of goods between Member States.
In its oral observations, however, it states, if I am not mistaken, that if in disregard of Article 37 (1) exclusive rights to import, export and market continue to be exercised by a State monopoly after the end of the transitional period, this special provision applies in respect of measures which in the absence of such a body would normally come under Articles 12, 30 or 95.
This question has been examined by Mr Advocate General Capotorti in his opinion of 4 July 1978, at p. 1814 in the aforementioned Hansen Case (judgment of 10 October 1978).
It seems to me that the Court has not yet expressly ruled on the issue although in that judgment it was held (paragraph 14): “Accordingly, it appears preferable to examine the problem raised by the national court primarily from the point of view of the rule on taxation laid down in Article 95, because it is of a general nature, and not from the point of view of Article 37, which is specific to arrangements for State monopolies. This approach is further justified by the fact that Article 37 is based on the same principle as Article 95, that is the elimination of all discrimination in trade between Member States”.
However according to the judgment of 17 February 1976 in the Miritz case ([1976] ECR 217, at p. 229, paragraph 8) “Article 37 (1) is not concerned exclusively with quantitative restrictions but prohibits any discrimination, when the transitional period has ended, regarding the conditions under which goods are procured and marketed between nationals of Member States. It follows that if application is not limited to imports or exports which are directly subject to the monopoly but covers ail measures which are connected with its existence and affect trade between Member States in certain products, whether or not subject to the monopoly, and thus covers charges which result in discrimination against imported products as compared with national products coming under the monopoly”.
The decisive criterion in this respect is the fact that certain measures arising from the existence of the monopoly have an effect on trade between Member States. The measures whose effect upon trade the plaintiff in the main action criticizes are directly connected with the existence of the monopoly. I must accordingly express great reservations on the Commission's views. If the abolition of discrimination arising directly from the provisions applicable to the products subject to the monopoly could be achieved by the provisions of the Treaty which prohibit charges or measures having an effect equivalent to quantitative restrictions (Articles 30 to 34) or discrimination in taxation (Article 95), Article 37 would be unnecessary. Accordingly the scope of this article is not confined to the pursuit and achievement of this single objective: this provision is intended to adjust monopolies, it being necessary according to Article 37 (3) that the adjustment itself “shall be harmonized with the abolition of quantitative restrictions on the same products provided for in Articles 30 to 34”.
The Commission itself is somewhat vague as to the date from which this transformation took place: logically it should have been 1 January 1970. According to the Commission however it was at best not until July 1977 that it took place. It appears from a reply which it gave on 13 December 1977 to a written question that the adjustment of the French economic system for alcohol was not final at that date and that the examination by the Commission was not finished.
In so far as they involve rules having an effect equivalent to a national organization of the market, I very much doubt whether all national monopolies of a commercial character — the French monopoly in alcohol in particular, as moreover the German monopoly, if I may be allowed to say so — have been adjusted in the way mentioned in Article 37 (1) even in July 1977 and that with the abolition of the exclusive rights to import, export and market the monopolies have ceased to exist as such.
Replying on 21 May 1976 to a written question the Commission stated: “As France has not yet taken steps to bring its alcohol monopoly into line with the requirements of Article 37 of the EEC Treaty in accordance with the judgments” 45/76 (Rewe-Zentrale) and 91/75 (Miritz)“the Commission opened infringement proceedings against it on 12 April 1976 under Article 169 of the Treaty”. There is nothing in the file to show what stage these proceedings have reached.
It accordingly appears to me extremely dangerous to relegate Article 37 to the museum of provisions which have no further use. In this case however the article must remain applicable in its entirety.
4.
In this respect we must not lose sight of a fundamental aspect: apart from its revenue rôle to which I shall return it is clear that the French monopoly in alcohol “has rules which are designed to make it easier to dispose of agricultural products” within the meaning of Article 37 (4). Within the limits of certain quotas it continues to be obliged to buy agricultural ethyl alcohol, to ensure its disposal and price in order to guarantee a certain standard of living to the producers. On 22 December 1969 the Commission considered “that it would be impossible to separate the final adjustment of the monopoly from the establishment of the common organization provided for ethyl alcohol of agricultural origin”. In reply to a written parliamentary question the Commission stated again on 28 April 1971 that “the final adjustment of the French and German monopolies in alcohol depends on the establishment of a common organization of the markets in ethyl alcohol of agricultural origin”. I entirely share this point of view.
There is no need to remind the Court that the common organization in question has still not seen the light of day and that the French system for alcohol has certainly not yet been adjusted so as no longer to have the character of a State agricultural organization with support measures for export which it has.
As evidence we need nothing more than the decisions of the Commission authorizing the levying of a duty intended to compensate for the disadvantage in competition suffered by the similar products of other Member States by reason of the national rules having an effect to a national organization of the market as constituted by the French monopoly.
In Commission Regulation No 1407/78 of 26 June 1978 the Commission states that “the difference between prices on the French market and those on the markets of [Germany, Belgium, Luxembourg and the Netherlands] results in particular from the pricing system applied by the French authorities, which consists in selling agricultural alcohol for export at an average price markedly lower than that at which the same alcohol is sold for consumption on the domestic market; whereas, however, as a result of recent changes in French policy this price system does not apply to alcohol left on the producers request at their free disposal”. It then recites that ‘the Council has not given a ruling under Article 42 of the Treaty on the applicability to ethyl alcohol of agricultural origin … of the provisions of the treaty relating to State aids’, which at best will be effectively done only in the body of the regulation on the common organization of the markets for this product and that ‘if France maintains its aid for exports of alcohol the ensuing difficulties can be alleviated only by fixing, under Article 46 of the Treaty, a charge on French exports, in order to restore market equilibrium’.
I also think that the price difference which the Commission mentions results from the French system for alcohol as a whole, a system which according to the Commission ought to have been ‘neutral’ since 1 January 1970, 1 April 1974 or 29 July 1977.
With all due respect however to the Commission and its argument I do not think that to authorize the levying of a compensatory charge constitutes a sufficient remed for this situation.
If it were correct, as the Commission maintains, that the obstacles or discrimination constituted by the French system for alcohol have been directly contrary to the provisions of Articles 30 to 34 and 95 of the Treaty since 1 January 1970, 1 April 1974 or 29 July 1977, Article 46 would no longer have applied since one of these three dates. Such at least until now has been the opinion of the leading commentators. The Court in its judgment of 20 April 1978 in Commissionaires Réunis ruled that Articles 45 and 46‘expressly concern the case of the provisional maintenance during the transitional period of national organizations of the market pending the substitution of common organizations.’
On the other hand recourse to Article 46 comes perfectly within the provision of the second subparagraph of Article 37 (3) which provides: ‘If a product is subject to a State monopoly of a commercial character in only one or some Member States, the Commission may authorize the other Member States to apply protective measures until the adjustment provided for in paragraph 1 has been effected.’ This seems to me evidence that it has not been effected.
May I also add the following observations:
Article 33 of the proposal for a regulation on alcohol submitted by the Commission to the Council on 7 December 1976 prohibits as regards alcohol of agricultural origin production and marketing monopolies and as regards alcohol of non-agricultural origin, marketing monopolies in view of the fact that alcohol of non-agricultural origin is produced by competing firms. If the adjustment provided for by Article 37 of the Treaty had been effected, there would be little purpose in such a provision.
Finally by its resolution of 28 December 1972 the Council has stressed that in its opinion the measures intended to ensure the effective grant, in accordance with the provisions of Protocol No 19 annexed to the Act of Accession, of export refunds on spiritous beverages obtained from cereals should be adopted simultaneously with the future regulation on the alcohol sector. The fact that this has not been adopted does not mean that the protocol has lost all relevance.
I therefore think that Article 37 as a whole is still applicable and that in particular it is still necessary in applying the rules contained in Article 37 (4) ‘to ensure equivalent safeguards for the employment and standard of living of the producers concerned, account being taken of the adjustments that will be possible and the specialization that will be needed with the passage of time’, which is the same wording as that used in Article 43 (3) (a) for the replacement of a national market organization by a common organization. This seems to me the only way of escaping from the complex difficulties which are raised, in respect of the provisions of the Treaty on the conditions under which aid granted by the States (Articles 92 to 94) may be regarded as having been notified in sufficient time to the Commission and in respect of the tax provisions (Articles 95 to 99) by making the systems of aid for alcohol established in France and the Federal Republic of Germany a matter of budgetary or fiscal measures to mitigate the absence of a common organization of the markets while respecting the letter of the provisions prohibiting quantitative restrictions.
The Court indeed ruled in the judgment of 3 February 1976 in the Manghera case ([1976] 1 ECR 91, at p. 100): ‘the obligation laid down in paragraph (1) [of Article 37] aims at ensuring compliance with the fundamental rule of the free movement of goods throughout the common market, in particular by the abolition of quantitative restrictions and measures having equivalent effect between Member States’ (paragraph 9); ‘This objective would not be attained if, in a Member State where a commercial monopoly exists, the free movement of goods from other Member States similar to those with which the national monopoly is concerned were not ensured’ (paragraph 10).
Nevertheless there was no ‘agricultural organization of the market’ in that case. As Mr Advocate General Warner said in his opinion ([1976]1 ECR 91, at p. 106) ‘there is no suggestion that the Italian tobacco monopoly exists, or has ever existed, to any extend for the benefit of Italian tobacco farmers’. On the other hand this agricultural component is of fundamental importance in the present case.
Some days later in the judgment of 17 February 1976 in the Reive case ([1976] 1 ECR 181, at p. 197) it was held that ‘the prohibition on all discrimination in this field [that is to say in the conditions under which goods produced or put into circulation by nationals of the various Member States are procured and marketed] … after the expiry of the transitional period constitutes an obligation to attain a precise result, the fulfilment of which had to be made easier by, but not made dependent on, the progressive nature of the adjustment provided for’ (paragraph 24).
In the judgment the same day in the Miritz case ([1976] 1 ECR 217 at p. 229) it was held: ‘Without requiring the abolition of the said monopolies, this provision prescribes in mandatory terms that they must be adjusted in such a way as to ensure that when the transitional period has ended such discrimination shall cease to exist’. Then the terms of paragraph 9 of the judgment in the Manghera case were adopted, customs duties and charges having equivalent effect being substituted for quantitative restrictions and measures having equivalent effect.
These findings have been made in connexion with the German monopoly on alcohol which certainly contains an agricultural element (in particular alcohol from potatoes). Does this apply to a monopoly such as the French monopoly in alcohol where the agricultural element appears to me much more important (alcohol from beet, wine deliveries)?
It was accepted in the judgment of 10 October 1978 in the Hansen case (paragraph 16) that ‘at the present stage of its development and in the absence of any unification or harmonization of the relevant provisions, Community law does not prohibit Member States from granting tax advantages, in the form of exemption from or reduction of duties, to certain types of spirits or to certain classes of producers’. This seems to me to reintroduce by means of Article 95 the adjustments provided for by Article 37 (4) and I query the wisdom of so doing.
To summarize my observations at this stage, I take the view that we are led to consider the prohibition of discrimination or measures having an equivalent effect to quantitative restrictions on the basis of the specific provisions of the treaty relating to monopolies, that is to say on the basis of Article 37 taken as a whole. In applying Article 37 (2) to a measure, even a new one, taken in the context of a system of monopoly acting as equivalent to that of a national organization of the agricultural market, the condition set out in Article 37 (4) must be respected.
IV —
Assuming that at the time of the matters with which the national court is concerned the prohibition of any discrimination, even in reverse, as laid down by Article 37 were ‘directly applicable’, it will still be necessary for ‘similar’ products to be involved in view of the rules on registered designations of origin. It is necessary to know whether the product made by the plaintiff is similar to the products originating in or coming from the other Member States (Italy) in relation to which it claims that it suffers discrimination.
A dismal dispute arose in this respect at the bar between the representatives of the plaintiff and the agents and experts of the French Government and I am not certain any more than is the Judge-Rapporteur, that I have perfectly understood the position.
According to the French Government, from 1974 to 1977, alcohol from the William Pear on leaving the still in France was regarded as raw or crude alcohol and thus reserved. If the producer were allowed to dispose of it the alcohol was subject to a cash adjustment. I do not know precisely in respect of which products the plaintiff ‘reclaims’ the payment of the cash adjustment; it seems that it is this alcohol or a beverage based on this alcohol made drinkable by the addition of water or distilled to a degree fit for consumption. If it is a ‘spirituous’ beverage ‘distinguished from ethyl alcohol’ by the presence … of flavouring substances or distinctive properties of taste’ it must be classified under heading No 22.09 C.V. whereas ‘undenatured ethyl alcohol or a strength of less than 80 o’ comes under heading No 22.09 A.
‘William Pear Spirit’ imported in bulk into France from countries of the EEC was treated as raw material and thus subject to the compensatory amount. On the other hand imported in bottles such spirit had to be regarded as alcohol usable or consumable without further processing. On this basis it would not have been subject to payment of the cash adjustment if it had been made in France; it was however subject to the compensatory charge on import because it could not be called ‘potable spirit’.
In support of its argument the French government cites the official notice of the French customs which states ‘the concept of products not usable or consumable without further processing, which is equivalent to that of raw material, covers products capable of competing for sales with State alcohol. Alcohol and spirits having an actual alcoholic strength equal to or in excess of 57o are treated as such’.
The Commission considers that these criteria are not valid. In its view products are not to be classified according to their container. This statement as worded does not seem to me to be correct. The effect of the volume of the container on the rate of duty is clearly apparent from the schedule to the Common Customs Tariff which makes a distinction in respect of heading No 22.09 A and C, according as the product is in containers of two litres or less or more than two litres.
It thus appears to me that the distinction is not only one of law or revenue but also technical, qualitative and local and it is not absurd to maintain that the words ‘products usable or consumable without further processing containing ethyl alcohol’ are not necessarily synonymous with the words ‘potable product’, since there are beverages such as gin or vodka which according to the manufacturing process are treated as ethyl alcohol of agricultural origin or spirituous beverages although so far as the consumer is concerned they have similar organoleptic characteristics.
The answer to be given in Case 86/78 assumes that the question of the tariff or customs classification of ‘William Pear Spirits’ imported from Member States and any ‘William Pear Spirits’ exported by the plaintiff has been resolved. According to the plaintiff the discrimination arises from the fact that the French Government treats ‘William Pear Spirits’ as raw alcohol when it is produced in France but as a spirituous beverage when it is imported. In any event the national court puts no question on this issue and unless the Court orders preparatory inquiries it is for the national court to determine whether the product in question is raw alcohol or on the contrary ‘potable spirits’.
V —
It will however perhaps not be necessary to decide all these delicate issues for the following reasons:
Let us remember that Case 86/78 concerns the compatibility with the Treaty of a national system which has finished and that the Commission has not made any application to the Court for failure to fulfil an obligation in this respect. In the plaintiff's view the system was discriminatory because alcohol originating in Member States which ought not to have been liable to the payment of a compensatory charge ‘or surcharge’ was then privileged in relation to national alcohol which before it could be ‘released’ was liable to the payment of a cash adjustment. In the recommendation which it sent to France on 22 December 1969 the Commission drew the attention of that country to the discriminatory nature of the compensatory surcharge on alcohol on import and asked for its abolition. In the recommendation, which has no binding force (Article 189) and which is the sole instrument expressly provided for by Article 37 (6) to achieve the adjustment provided for in that article (the recommendation was not published until after the expiry of the transitional period) the Commission states that ‘the unconditional opening of the French market to products from other Member States before the introduction of the common organization of markets could … adversely affect the sale of French ethyl alcohol of agricultural origin and the competitiveness of French spirits and consequently the employment and standard of living of the producers of certain raw materials’. Referring to Article 37 (4) its stated that it might be necessary to take special measures until the entry into force of the common organization of the markets and it accepted the lawfulness of the levying of a compensatory charge on the import of alcohol and alcoholic beverages.
1.
In the plaintiff's view, as from 1 January 1970 the producers of the other Member States should have been free to export and market their products in the monopoly State, whereas the nationals of such State were deprived of their right freely to market their products, either in their own State or in others. It alleges that since the levying of the compensatory charge (or surcharge) was unlawful importers of foreign products ought not to have paid it and if this had happened, the levying of the cash adjustment on French producers was discriminatory.
The position of the manufacturers and importers of the products in question however, assuming it to be similar, does not in fact appear to me to be indentical. The right which exporters of the original Member States of the EEC had of freely exporting alcohol to France. since 1 January 1970 on payment of the duties provided for was purely theoretical: it was recognized only as a result of the judgments in the Rewe and Miritz cases which do not have the effect of regulations nor are they retroactive. The alcohol from other Member States in respect of which the plaintiff alleges it suffered discrimination was subject to other restrictions. Until 1 April 1974 it was subject to the compensatory surcharge referred to in the recommendation of the Commission of 1969.
2.
Even after 1 April 1974 and until 29 July 1977 the import of ethyl alcohol was subject to the payment of a compensatory surcharge equal as regards the pure alcohol contained in the product ‘to the difference between the lowest purchase price paid by the Service des Alcools at the end of the previous marketing year and the same price of alcohol intended for a corresponding use’, words similar to those subsequently used in Article 269 of Annex II as regards the cash adjustment. The import of products ‘intended for drinking and containing ethyl alcohol’ from Member States was ‘when the minimum sale price of neutral potable alcohol in the country of origin is lower than the sale price payable in France for the same use’ subject to a compensatory charge equal to the difference between the two prices.
It is possible that the obligation imposed before July 1977 on producers to deliver the whole of their production to the State prevented them from exporting such production and affected, at least potentially, trade between Member States. The fact that the State acquires only part of the national production (that which the Service des Alcools is prepared to sell) at an economically reasonable price may impose an actual quota on the national production. Further if the producers of the EEC had the right freely to market their production of alcohol in France there would be discrimination against the French producers which would disturb equality of competition aimed at by the Treaty. This is not however the case, and it may be that in view of the levying of a compensatory charge initiated in 1974 the domestic product may have been placed as regards its ultimate price in a more unfavourable position than the comparable imported product and that the compensatory charge may have increased when in the context of its sale policy the administration of the monopoly fixed a particulary low price for the alcohol sold for special purposes and as compensation fixed the sale price of potable alcohol at a particularly high level.
The French Government however observes that in the absence of a common organization of the markets in alcohol guaranteed supplies compensate French manufacturers and users of national alcohol for having to pay a cash adjustment which is payable only on raw alcohol (and not alcohol usable or consumable without further processing) when there is no cash adjustment payable on imported alcohol which is usable or consumable without further processing.
Article 95, which is also considered by the Commission, prohibits Member States from imposing taxation on imported products in excess of that on similar domestic products: at the time imported products were subject, rightly or wrongly, to taxation similar to that to which the domestic products were subject. There was therefore no discrimination in this. In the view of the French Government that article does not prohibit the imposition of the same taxation on an imported product and a similar domestic product even if part of the charge on the domestic product is applied for the financing of a State monopoly whereas that on the imported product is levied for the benefit of the general budget of the State.
3.
The national court however is also asking about the discriminatory nature of the situation in which after 29 July 1977 pure alcohol (raw material) contained in imported spirituous beverages is not subject to the cash adjustment whereas such alcohol when it is contained in spirituous averages made in France is so subject. Although the answer to this question appears to me quite unnecessary for the purpose of judgment in the case with which the national court is concerned and that it might be more appropriate for it to be the subject of an application for failure to fulfil an obligation I shall make the following observation :
The Commission finds that the cash adjustment which is levied by the Service des Alcools in exchange for allowing French producers freely to dispose of the alcohol reserved to the State (and which is equal to the price supplement levied in the case of transfer back by the Service des Alcools, a supplement referred to in Article 2 of the Decree of 25 July 1977) is equal to the adjustment levied in France on alcohol produced in other Member States and used or consumed in France. In so far as this adjustment fits into the general fiscal system applicable to alcohol used or consumed in France it does not constitute an obstacle to the free movement of goods and is compatible with the provisions of Article 95.
In other words the adjustment in the new first paragraph of Article 269 is the counterpart of a system of aid granted in favour of the production or marketing of national alcohol of agricultural origin. I very much doubt however whether the conditions in the second and third sentences of Article 93 (3) have been respected, since, in line with the judgment in the Miritz case, there should exist as from 1 January 1970 in the original Member States a system of ‘free trade’ in relation to ethyl alcohol of agricultural origin and Article 4 of Regulation No 26 of the Council of 4 April 1962 should also have ceased to apply.
In the view of the plaintiff in the main action the ‘discrimination’ arises from the fact that French producers remain bound to transfer their production to the monopoly unless they pay the cash adjustment whereas producers from the other original Member States are allowed freely to export into France. Even if the exclusive right to impon and export has been abolished, by reason of the obligation on the national producers to deliver to the monopoly, that monopoly directly or indirectly influences trade. This position has its origin in the obligation to buy at a guaranteed price together with the obligation to transfer their production imposed on the national producers: only the abolition of this obligation which is the counterpart of the monopoly of purchase by the Service des Alcools could end any possibility of discrimination in reserve. In my opinion such abolition would effect the very existence of the monopoly and would involve its abolition whereas the existence of monopolies is expressly reserved by Article 222.
This problem however is still the subject of negotiations on the establishment of a common organization of the markets in ethyl alcohol. Although this question has not been raised from this aspect in the context of the present cases, the French Service des Alcools undoubtedly constitutes, if not a service ‘of general economic interest’ at least something of ‘the character of a revenue-producing monopoly’ within the meaning of Article 90 (2). The objective of such a monopoly is inter alia to achieve the maximum revenue compatible with the optimum equilibrium of the supply of alcohol and the demand for it. The simple abolition of the obligation to transfer production would frustrate the achievement both in law and in fact of the objective which has been given to this service. The question whether the maintenance of this obligation affects the development of trade to an extent contrary to the interests of the Community naturally remains open. This requires careful assessment for it is linked to considerations of public health. It is a question of reconciling quite contradictory objectives, on the one hand maximizing the revenue from the production and consumption of alcohol and encouraging the free movement of this product and on the other of not losing sight of the fact that the economic system for alcohol is not without effect upon health policy and that a surplus production of ethyl alcohol would be contrary to the difficult aim of an equilibrium between revenue and public health. Apart from their objective of organizing the market and providing revenue, it is undeniable that all kinds of duty, especially in the new Member States, are justified by the essential requirements of public health.
To summarize my observations concerning the first case I consider that although during the period 1974 to 1977 which the national court regarded as relevant the cash adjustment was borne by the national manufacturers as regards products usable and consumable without further processing and containing free alcohol, this charge is at least compensated for by the tax to which similar products imported from the other Member States were subject. The fact that these constraints or conditions may have been contrary to the Treaty cannot profitably be relied upon by the plaintiff in the main action since the validity of such constraints from the point of view of Community law has never been raised before the Court either in a direct application or by way of reference for a preliminary ruling.
The same reasoning applies as regards the alleged discrimination resulting from the fact that the ‘liberated’ French alcohol or the French spirituous beverages containing ‘liberated’ alcohol were less competitive on external markets as a result of the introduction of this cash adjustment: in the event of export of these products the adjustment on the ‘liberated’ national alcohol contained in such products was either not levied or it was refunded.
VI.
1.
Whereas the plaintiff alleges that it was discriminated against in relation to national importers of ‘Williams Pear Distillates’ (Case 86/78), it complains in Case 119/78 of being put at a disadvantage in relation to national manufacturers of liqueur who produce a genuine Cointreau. It seems, and I say this guardedly in the absence of any other particulars in the file, that it intended to ‘refine the alcohol’, an operation which is not a simple modification, for the refinement of alcoholic liquids involves a redistillation leading to the manufacture of different products within the meaning of the French rules or redistillation of raw material to produce or manufacture a new alcohol rectified to a high proof. The production of rectified alcohol of high proof is reserved to the State under Article 358 of the Code Général des Impôts which I have previously mentioned.
The case with which the national court is concerned is thus not without similarity to the Miritz case. That case was concerned with a quantity of citrus peel distillates or concentrated extract of various aromatic substances in a solution of alcohol, classified under tariff heading 33.04, which is used as a raw material in the preparation of beverages falling within heading 22.06. There was a prohibition on import into the Federal Republic of Germany before the passing of the Law of 23 December 1970 and the German monopoly had the exclusive right of importing ethyl alcohol and products containing it. Before that Law the function of the German compensatory charge was guaranteed by this exclusive right which in practice involved a prohibition on import except as regards certain products. Nevertheless as against the present case, the question was not the prohibition on the use of this product but the recovery of the amount of the compensatory charge introduced by the German law on the basis of the alcoholic content of the goods.
In the view of the plaintiff in the main action the goods in question were not raw material (infusions) for the production of alcohol but alcoholic raw material (infusions) intended for the production of alcohol or spirits. Fruit, the fermentation of which has been suspended by its immersion in high strength alcohol is not raw material for the production of alcohol but an alcoholic infusion. In this event however the product is one to which non-denatured ethyl alcohol of less than 80o and of agricultural origin has been added and such produce falls within heading 22.09 B‘compound alcoholic preparations (known as “concentrated extracts”)’ which it is intended to make subject to the future common organization of the markets.
There thus arises, as in the previous case, a preliminary question of classification.
There is no Community concept yet of alcoholic or alcohol-producing ‘raw materials’. On the other hand it was held in the Hansen case of 10 October 1978 that:
‘At the present stage of its development and in the absence of any unification or harmonization of the relevant provisions, Community law does not prohibit Member States from granting tax advantages, in the form of exemption from or reduction of duties, to certain types of spirits or to certain classes of producers.
Indeed, tax advantages of this kind may serve legitimate economic or social purposes, such as the use of certain raw materials by the distilling industry, the continued production of particular spirits of high quality, or the continuance of certain classes of undertakings such as agricultural distilleries’ (paragraph 16).
‘Difficult problems regarding similar treatment can arise in this context in view of the elements to which the legislation of the different Member States has linked the granting of the tax advantages concerned, such as the nature of the raw materials, the technical characteristics of the equipment, the distilling processes, the taxation procedure and the methods of fiscal control’ (paragraph 18).
The national court has ruled that in so far as they are intended for distillation the ‘oranges steeped in alcohol’ in question are raw material within the meaning of Article 268 of Annex II and it seems that it is because the fruit has been enriched with alcohol other than agricultural alcohol of national origin that the administration is refusing the authorization requested by the plaintiff: it is alcohol originating from a non-member country or alcohol made in a Member State from raw material originating from such Member State or a non-member country, but we do not know with certainty its nature and origin.
2.
Let us remember that in France under Article 268 of Annex II to the Code Général des Impôts:
(1)
Imported fresh fruit other than apples, pears and grapes may be distilled.
(2)
Imported fresh apples, pears and grapes may not be distilled.
(3)
Other imported ‘raw material’ may not be distilled.
First I must voice certain doubts on the compatibility of the prohibition on distilling fresh fruit, at least as regards pears, with the standing calls for tender issued by the Italian Intervention Agency (A.I.M.A.) for the transfer of pears withdrawn from the market to the distillation industry, such as that which is the subject of the notice published in the Official Journal of 10 June 1978, since Regulation No 1562/70 of the Commission of 31 July 1970, on the basis of which such a tender was arranged, provides for ‘equal treatment for all interested parties in the Community’ and for the opportunity for ‘any industrial undertaking to submit a tender’ provided that the product allocated is processed into alcohol of a strength of more than 80o.
3.
The national court however has found that since the oranges steeped in alcohol are imponed, the fact that they cannot be distilled brings into question the free movement of goods within the Common Market and the prohibition of any discrimination between nationals of Member States (Article 37).
As a result even if the plaintiff were allowed to impon the product in question (and the administration admits theoretically it is so entitled) it cannot use it as it intends.
The wording of the question put to the Court is somewhat obscure. Article 10 is concerned with products coming from non-member countries and in free circulation in a Member State and I do not very well see the relevance of this article to the case before the national court unless there is a ‘deflection of trade’ by Italy, for example if the oranges in fact came from Spain and alcohol had been added either in Spain or in Italy whether such alcohol originates from Italian or foreign raw material. The question must therefore be reformulated as follows: Do Articles 10 and 37 or any other provision of the Treaty bar a national measure prohibiting the distillation in a Member State of raw material originating in another Member State or in free circulation in such State after importation from third countries?
The plaintiff in the main action infers from the case-law in Miritz that the prohibition on distilling (alcoholic) raw material in conjunction with the existence of the monopoly prevents the import of such raw materials from other Member States and thus constitutes discrimination in so far as the same raw material may be freely distilled when it is of French origin. Put into free circulation after import from non-member countries such raw material has been subjected to the duties or levies provided for under heading 20.06 B I and the plaintiff would like to be able freely to distil what it calls ‘compound spirits’ without avoiding payment of the ‘duty on consumption’.
Here we come back to the same question: would not the abolition of this prohibition involve in the end, at least partially, the disappearance of the monopoly whereas Article 37 requires only its adjustment in the circumstances provided for in paragraph (4)? I can only repeat the doubts which I have mentioned previously. In addition let me say that since it is a question of alcohol not requiring further processing or contained in other products imported from countries which are not members of the European Communities, the provisions of Council Directive No 69/74 of 4 March 1969 on the harmonization of provisions laid down by law, regulation or administrative action relating to customs warehousing procedure and of Council Directive No 71/235 of 21 June 1971 on harmonization of the provisions laid down by law, regulation or administrative action relating to the usual forms of handling which may be carried out in customs warehouses and in free zones apply.
Although, as the Commission proposes, the matter must be viewed in the light of the general scheme of Article 30 et seq. of the Treaty, nevertheless for the prohibition to be unjustified it would not have to apply to ‘similar’ national products and it would have to be possible for these to be freely marketed. It is for the national court to check whether this is so.
In this case and in the event of the ‘raw material’ in question not being ‘compound alcoholic preparations’ falling within heading 22.09 the prohibition on distilling oranges steeped in alcohol coming from Italy or from non-member countries after having been put into free circulation in Italy appears to be contrary to Community law.
4.
Originally fruits prepared or preserved with alcohol did not come under the common organization of the markets in fruits and vegetables. In the same way fruit prepared or preserved otherwise, with or without the addition of alcohol and with sugar added, were not covered by Commission Directive No 66/683 of 7 November 1966 abolishing all difference of treatment between domestic products and products which, pursuant to Articles 9 and 10 of the Treaty, should be allowed free circulation. In any event by reason of Article 3 thereof this directive was not applicable to provisions made under Article 37 (1) of the Treaty or forming part of a national organization of the agricultural market. Article 5 of Commission Directive No 70/50 of 22 December 1969 is to the same effect.
‘Oranges steeped in alcohol’ however are covered by Council Regulation No 516/77 of 14 March 1977 on the common organization of the market in products processed from fruit and vegetables and, save as otherwise provided or where derogation therefrom is decided on by the Council on a proposal from the Commission, the prohibition on distilling in question has been contrary to Article 13 (2) of this regulation since 1 April 1977.
My opinion is that the question should be answered as follows:
In March 1977 the concept of ‘discrimination regarding the conditions under which goods are procured and marketed between nationals of Member States’ within the meaning of Article 37 of the EEC Treaty did not cover the levying, for the benefit of a State monopoly, on certain alcoholic raw materials of a cash adjustment on transfer when the producers are free to dispose of them, to which cash adjustment similar products originating in other Member States have also been subject nor did it cover the prohibition on distilling applicable without distinction in a Member State to raw materials coming from a non-member country after being put into free circulation in another Member State and to the same national raw materials.
(
1
)	Translated from the French.