61973C0002
OPINION OF MR ADVOCATE-GENERAL TRABUCCHI
DELIVERED ON 20 JUNE 1973 (
1
)
Mr President,
Members of the Court,
The facts are clear. In Italy, a public body has existed for several decades which carries out activities involving research, technical aid and publicity with a view to increasing the consumption of rice. It is called the Ente nazionale Rise (National Rice Authority).
A commercial undertaking says to the Italian court: ‘We were under no obligation to pay — and if we did pay, see that we are reimbursed — the compulsory charges which the law levies on purchases of paddy rice for the benefit of the Authority. Since the creation of a single market organization the contribution exacted from us harms us as a regular user of Italian rice in a way which does not apply to our foreign competitors. We are therefore being discriminated against, and this is prohibited of the Treaty.’
The questions which the Pretore of Milan has referred to the Court are all concerned with one central problem. There are many questions, but the problem is a single one and we must confront it in all its aspects before proceeding, as we shall eventually, to answer the specific questions in which the reference to this Court was expressed.
It is a problem of general application and great importance and it cannot be resolved by looking only at the case before us. This is because your decision will have an impact of dimensions difficult to estimate, since we are dealing with the various mechanisms which, during the last decades, public control in all Member States had created for the protection of particular products in the national agriculture.
It is true that, in this sector, the usual object of attention is the practice of the Member States of granting aid for the benefit of their own nationals. The practice for study by us is complementary to this and has certain features in common with it in the context of the prohibition of discrimination; it concerns the charges which public bodies operating for the benefit of the country's agriculture sometimes impose on certain categories of national business concerns.
Even without knowledge of the details, it is, we know, notorious that in the various Member States, aids and special charges in the agricultural field exist in many forms. These two forms of State intervention have been the subject of examination by the Commission but, because of their complexity and of their importance within each State for the group of businesses concerned, it has not yet proved possible, at Community level, to lay down sufficiently precise criteria upon which to base any concrete limitation on the powers of Member States in this respect. So far it has only been possible on the subject of aids to draw up a plan designed primarily to establish the precise nature of general systems of aid for regional purposes so that can be more effectively supervised and coordinated in accordance with uniform and objective criteria. On the subject of special charges of a fiscal or quasi-fiscal nature, however, no plan of action has been adopted to date.
As is clearly shown in its observations in the present proceedings, the Commission is well aware that even the special charges imposed in the agricultural field on a purely national level run the risk in many cases of interfering with the free play of the market, and of introducing discrimination between Community businesses in the economic sphere, with consequent disturbance and obstruction of the proper functioning of the mechanisms provided of the common organization of the markets especially in relation to the evolution of a common prices policy. The Commission maintains, however, that ‘until legislative measures in the fiscal and related fields have been brought into line with each other and, in the absence of a “Communitization” of such measures — I beg forgiveness for this barbarism, to which I must adhere in deference to the text I am quoting — or of express prohibition, Member States still have the power to levy this particular type of financial charge’.
The question now facing us is whether, given a common organization of the agricultural markets based on a common prices policy, Member States are in any way restricted in exercising their power to levy charges of any kind in respect of products coming under Community control.
On this point, the Geddo undertaking maintains that, in terms of logic, the mechanism of the common organization of the markets and its basic functional requirements are fundamentally opposed to the continued and independent power of Member States to levy charges in respect of products which are subject to a common organization of the markets. Specifically, the terms of the second paragraph of Article 40 (3) of the Treaty militate against possession of such power by Member States because they prohibit any kind of discrimination between producers or consumers within a common organization of the market.
On the other hand, the Commission seems to be arguing that, at the moment, in the absence of legislative provisions expressly excluding or restricting the power of Member States to impose fiscal or similar charges in relation to agricultural products, the only concrete basis for the prohibition is action on the part of the Community institutions. The Commission maintains that the drawbacks arising from the continual exercise of the autonomous power of Member States could only be removed by adoption of the appropriate legislative measures.
Viewed against the background of my considerations, both theses appear unsatisfactory to me: the one because it goes too far, the other because it does not go far enough. At this point, as Advocate-General, I believe it necessary to recapitulate, rationally and systematically, the legal concepts and economic mechanisms which have a place in our law and to do so, generally on the subject of agricultural regulations, and specifically on the subject of preliminary rulings given under Article 177.
Let us begin with the basic concept of the direct application of Community law.
This will help us to understand Community rule and to establish whether it can be regarded in itself as nullifying or at least rendering inapplicable the national law imposing the charge it is wished to avoid.
In our case, the very tact that the collection of the charge is based on a national law is used to justify the refund of that charge on the ground that the national law imposing it is incompatible with Community law. From the practical point of view, therefore, it is desirable to assess the validity of the national enactment by resorting to the interpretation of Community law.
Hitherto, in dealing with the charges imposed by the States, it has been for the most part a question of assessing this direct effect, in relation particularly to measures providing for the imposition of certain specific charges connected with the customs laws of the country concerned. The question has been very simple to answer because the conflict was selfevident: a national law conflicted with an order of greater authority given under a Community rule having a very precise target and a very clear significance and scope in relation to the situation for which it provides. When, however, one goes on to consider infringements not in relation to a specific order the subject matter of which is readily identifiable but with a more general principle, the solution is not so easy, especially on the subject of preliminary rulings. Thus, we know that the invalidity of specific national laws which bear the marks of previous restrictions placed in the way of trade across frontiers is not usually deduced from the general principle of the free movement of goods alone and not even from the declaration, itself in general terms, of the prohibition on discrimination but from specific enactments which prohibit customs duties, quantitative restrictions and charges having equivalent effect.
The general principle or tree movement has sometimes been invoked on the basis of Article 3 (f), relating to the creation of a common market based on free competition, but this has been exclusively in connection with the behaviour of individuals and with a view to demonstrating the illegality of abuse by individual undertakings of privileges bound up, under the national law applicable to them, with proprietary rights, with consequent prejudice to the free movement of goods between States and serious restrictions of the competition which should be the basis on which, at Community level, business undertakings conduct their activities (See Judgment 78/70 Deutsche Grammophon Gesellschaft, Rec. 1971, p. 487 et seq.).
To deal now with the prohibition on discrimination, this is not a subject which arises only in the extreme situation when people are treated better or worse according to their nationality. It is difficult to give an a priori definition of its import not only because of the breadth of its scope but also because the task of identifying a situation in which there is discrimination takes second place to assessment of the ‘comparative’ nature of each situation taken separately. Outside the extreme example of discrimination described above, the problem requires in general not only, and not so much, a study of the formal attributes of a national law, but rather an assessment of factual, especially, economic, features in relation to the particular aims which are determining factors in the sector concerned and the importance of which can vary not only in subject-matter but also in time, according to the objectives which, within the ambit of a given Community policy, are given priority.
Coming to the present case and, in this preliminary examination, confining myself to an analysis in purely general terms, we find in essence two types of legal grounds adduced in support of the plea of the invalidity of the national legislation. They are:
1.
That in creating a single market (which is a form of integration closer than the common market) such as the one which emerges from the common organization of the market for the product under consideration, the Member States have given the Community a kind of delegated power of legislation the effect of which is to preclude other legislation. This tends to render invalid, obsolete or in any case inapplicable to products coming under the common organization all national measures which disturb the essential unity of the market and, therefore, the uniformity of the provisions governing the agricultural sector concerned.
2.
That every charge, of whatever kind so long as it is compulsory, which bears specifically and essentially on the products of a single country, creates a situation in which there is discrimination, contrary to the principle of equality of treatment between Community businesses. Any fiscal or quasi-fiscal measure which treats goods, particularly single products, on the basis of nationality should, therefore be considered null and void.
The objections to these conceptions which arise from a first examination of the subject, and which I shall wish to develop later in this opinion, are the following.
On the first point, concerning the alleged consequences of automatic repeal on the creation of a single market, one notices that such creation did not amount to root-and-branch abolition of all existing mechanisms and systems, even those embodied in legislation, which in any way affect products coming under the common organizations of the markets. Replacement must, in accordance with the general lines of Community action, arise from action on the part of the Commission. Quite apart from cases of absolute incompatibility, such as, for example, State measures for a national marketing system for the products concerned which are obviously replaced by Community measures, it is not a question of automatic repeal but of the power conferred on the appropriate bodies to introduce a new system. So true is this that, even within the ambit of a unified market, many variations are destined to last some time longer as a result for example of the different fiscal systems and different levels of taxation established and maintained in the Member States.
Regarding the second ground for invalidation of internal law, based on alleged infringement of the prohibition against discrimination, in the actual context in which we must look at a prohibition of this nature, let us remember to reject from the start any kind of legalistic answers to the question — such as the suggestion that discrimination cannot exist because Italian rice undertakings are free to acquire rice of non-Italian origin, an argument that ignores the economic realities which stem from the geographical location of the rice industry, which is far from the sea and near Italy's industrial centres. We must equally reject the suggestion that discrimination arises automatically from the fact, taken by itself, that the special charge applies only to production in Italy, without taking account of the other relevant economic factors in order to establish whether the inequality in treatment relates to comparable situations.
Against this background, I say at once that, in the circumstances of this case, no factors emerge which are sufficient to create any effective discrimination against the domestic product. In fact, the system which came into being with the Ente Risi cannot be simply described as either for or against domestic produce and, although the quasi-fiscal aspect certainly constitutes a negative factor, one must point out that the very object of the Ente's activities are, at least as it was conceived in the original legislative measure, to further the interests of the national production. Moreover, I do not believe that agriculturalists would agree that all the agricultural boards (for example, the meritorious consortia who operate in agriculture) can be regarded as harmful to their interests; the boards levy the charges which maintain them in operation from the very people who benefit from their activities. Again, in the situation which gives rise to demands for direct application of the Community prohibition, there is none of the clarity necessary to call into play what I shall describe as automatic confirmation of discrimination. An infringement of the principle of non-discrimination cannot in fact be indentified solely in the light of possible consequences: a consequence of recognizable character must also be involved. It is at this juncture too that the opportunity occurs for intervention on the part of the Commission to confirm the existence in practice of any departure from the Treaty because of the Ente Risi's present method of operation. If the Commission establishes that, within the territory of a Member State, a particular intervention on the part of a public authority is capable of disturbing the operation of a common organization of the market, it cannot, of course, content itself with vague hopes that the intervention will adjust itself to Community requirements; it has a definite obligation to look at the situation more closely, to identify concrete examples of intervention and, if the outcome is to reveal anything incompatible with Common Market principles or machinery, the Commission must take the most appropriate steps to reconcile the difference, including, where appropriate, the procedure provided for in Article 169 of the Treaty the relevance of which to the present subject cannot, as the Commission seems to think, be dismissed in general terms, as I shall shortly explain.
Some third parties seem to have wanted the Court to take a bold course, which the Commission would have found it more difficult to follow in the present case, as it involves laying down a principle which would disrupt the application of agricultural legislation in most of the Member States. The Court would be able to do so on the basis of ‘fiat justitia’, the principle underlying its own essential function, but the wisdom which the Court has always shown demands that justice must be done ‘ne mundus pereat’. It must be said that, when the Court applies the very important instrument entrusted to it, the preliminary ruling, an interpretative intervention achieves maximum value only in the context of the system and the harmonious equilibrium which the Treaty has established between all subject to Community discipline and the respective powers of the institutions. Emphasis must certainly be laid on the concept of direct application, which is essential to enable the system to work properly, but, in the interests of preserving its value and effectiveness, this property cannot by ascribed indiscriminately to all the provisions and all the principles of the Treaty, even the most general ones, by drawing arguments from their interpretation subordinating the legislation of Member States to the authority of theoretical conformity and thus giving an individual the right to exempt himself from complying with quite precise enactments. Instead, because the situations arc complex and the demands they make are numerous, it shows how advisable it is for the Community institutions charged with applying and implementing the general principles to study in concrete whether they are observed (which obviously implies a more precise definition of their import). In regard to the law, and in order that the law should be observed, no legal system should stray from the Apolline maxim on moderation μηδεν αγαυ which comes to us from the wisdom of the ancients and is a guarantee of true and constructive justice.
Specifically, it has been claimed that the principle already laid down in general terms by Article 7 of the Treaty has been infringed because, it is said, a distinction has been drawn between rice produced in Italy and rice produced in other countries. In the spirit of the law which brought it into being, the activities of the Ente Risi must have helped to enhance the quality and quantity of national product (at least in the past, it is not known to what extent this is still true). It was for this reason that foreign rice processed in Italy was not brought within its ambit (if it had been, it would have been the foreign producers who, with more obvious justification, could have claimed an infringement of the Treaty and damage to their interests), and its scope was confined to the product for whose benefit the Ente carries out is work.
To conclude this preliminary examination of the case, I have said that, before we could discuss discrimination which has in fact caused damage, it is also necessary to have precise bases of comparison. But we lack the bases on which to make a comparative judgment in regard to the other rice-producing country, which is France. We only know that French rice is, if anything, subject to heavier national charges than Italian rice and that they are levied direct on the agricultural rather than the industrial producer. We are not even able to get within reach of assessing the level of protection provided against rice imported from third countries, because there are no precise data enabling us to know whether or not these cost factors are reflected in the process of determining the level of protection against imports.
Against this background, which I have felt it necessary to describe in order to simplify the arguments in this case, let us now examine the position of those who have developed varied and complex propositions for our consideration, leaving for the moment any description of the familiar mechanisms which are part of our subject-matter.
The mechanisms for protection and stabilization of the Common Market are applied in conjunction with intervention prices which are fixed so that differences between them reflect, in the case of a normal harvest, variations due to natural conditions relevant to market-price formation. These mechanisms are designed to create and maintain a single price system in the Community for each product. This price is not fixed by authority but is determined by the mechanisms themselves, which are employed in such a way that the price should tend, in the case of a normal harvest, to however around the target price, given the free movement of products within the Common Market and, as a result, the greater possibility of balance between the surplus of the producing areas and the needs of areas where there is a shortage.
Although this machinery ensures tree movement of agricultural products within the Community and stability of prices in the internal market, there is, on the other hand, no limit to the demands made in the agricultural sector on businesses at various levels and on the economy in general. There are in the Member States different bodies or authorities continuing to carry out activities which are important in various ways (technical aid for agriculturalists, dissemination of information, certification of origin, research on improved methods of cultivation and quality of product, improved marketing systems, etc.). It is undoubtedly desirable that all these activities and services on behalf of agriculture and the agricultural processing industry itself should be carried out on a basis of uniformity throughout the Community, and this can gradually become a reality as the political structure, which is being promoted by the Community in the agricultural field, is developed. But it is undoubtedly true that, as things stand at present, the Community is not in a position either to replace or bring into uniformity with each other on a day-to-day basis the national measures which govern and make possible the exercise of these functions which are of such value to agriculture.
These activities are often financed out of charges imposed on agriculture itself, although not always on the groups most directly interested. The diversity of the centres of activity and the relevant national rules makes differences of treatment between Community operators in agricultural matters inevitable, both as regards the quantity and quality of the benefits they receive from public agencies operating in their field and as regards the number and the amount of financial charges which they are called upon to bear in exchange for their benefits. These considerations suffice to show how weak the foundations are for an interpretation of the prohibition on discrimination, as set out in the second paragraph of Article 40 (3) of the Treaty, which would be so rigid as to preclude the Member States from continuing, even for a limited period of time, to adopt their own measures in regard to products coming under the common organizations of the market, whether by promoting and maintaining in various ways specific agricultural activities or by financing such activities by levying fiscal or quasi-fiscal charges on products subject to a common organization of the market.
Nor, from another point of view, is it possible to say that this prohibition represents a plan to be developed as contingencies occur in the sense that it would have a direct bearing on the way in which the single Community executive fulfilled its task of implementing the common organization of the markets. It will be for the Community institutions to take further steps, by means of Community regulations or directives, to ensure full realization of this principle and, consequently, the elimination or approximation of specific measures applied by the States which, while offering advantages at local level, have at the general level of the Common Market the disadvantage of distorting competition and disturbing the functioning of the common mechanisms. It is, however, beyond doubt that the prohibition on discrimination now has a binding force which goes beyond the institutions themselves. Representing a basic principle of the common organization of the markets, the prohibition on discrimination also applies to Member States and its legal scope extends to individuals as well, insofar (without going into the quantitative aspect) as measures adopted by States impinge directly on the way in which Community rules on the common organization of the market are applied to them. Thus, for example, every time a State puts a tax on the intervention price or on the export refund, there can be no doubt that, at however low a rate it was levied, such a charge is contrary to the above-mentioned prohibition in the second paragraph of Article 40 (3). This is because it would have the effect of reducing the amount fixed by the Community, to the detriment of ail subject to the fiscal authority of the State concerned, and thus lead to a discriminatory application of Community rules. In a case of this kind, there is a direct relationship between the national law and the basic rules of the common organization of the market and this would substantially compromise uniform application of Community laws. In such a situation, a difference of treatment between Community businesses within the framework of the common organization of the market has a clear and easily identifiable impact on the way in which Community mechanisms on agricultural prices are applied. Its identification and removal do not involve considerations of economic policy or, more generally, of expediency. In that case, the prohibition on discrimination has an import clear enough to justify its enforcement forthwith by the national courts. Within these limits the rule in the second paragraph of Article 40 (3) is directly applicable in the full sense which decisions of this Court have given to the principle involved.
However, when there is no direct connection between State rules and rules which regulate the basic mechanisms of the common organization of the markets with which we are concerned, and the impact of a change imposed or tolerated by any State on the uniform application of Community rules is less marked, as indeed will be generally the case when domestic taxation does not directly impinge on the field covered by Community rules, it would be for the Commission to examine whether there was an incompatibility between such legislation or conduct of the State concerned and the requirements or directives of Community rules. The Commission will accordingly carry out all necessary studies on the complex economic aspects and then, with the means at its disposal including if need be the method provided for by Article 169 of the Treaty, bring to an end a situation which may prejudice the functioning of the common organization of the market. But, given the large number of complex factors to be taken into account in any appraisal to establish whether such a conflict exists and its gravity as well as to determine when and how to remove it, it will not be possible to regard the prohibition as directly applicable and creating rights in favour of individuals.
We are not losing sight of the fact that, where special charges fall only on businesses which are subject to the State imposing them, the absence of any direct effect from Community law which could possibly be invoked against the maintenance of such specific measures can represent a serious erosion of the safeguards available to protect private interests. Indeed, in such circumstances private individuals who want to establish that these measures are incompatible with the Treaty will not even in practice be able to rely, as they can when it is a question of State aid, on other Member States taking the initiative in pressing the Commission to act, or in the extreme case, instituting proceedings if the Commission fails to act.
We know however, that limitations of this nature are inherent in the system and, in the context of the single agricultural market, even understandable in the present stage of its development.
From such considerations of a general nature, we now turn to an examination of the questions put by the national court concerning the compatibility of a certain type of special levy with the common organization of the market in rice.
The Ente nazionale Risi was set up by Decree No 1237 of 2 October 1931 to safeguard national rice production and related industrial and commercial activities, by facilitating distribution of rice, encouraging its consumption and initiating and supporting measures for improving its production, processing and consumption. Under Article 9 of the Decree, the Ente funds its operations from a levy payable by the purchaser on every contract for the sale of paddy rice, the amount of this ‘ontract duty’ being fixed annually by the Ente itself with Ministerial approval.
In the first question, the Pretore of Milan asks whether, by virtue of the second and third paragraphs of Article 40 (3) of the Treaty of Rome, taken together with Article 5 of the Treaty, Member States in general, and the Italian State in particular, are prohibited from allowing, for the benefit of a body which is not the State a levy or pecuniary charge of a fixed sum of money to be imposed on the purchase of every quintal of paddy rice produced in Italy.
In the paragraphs referred to above, Article 40 of the Treaty declares that the common organization of the markets ‘shall be limited to pursuit of the objectives set out in Article 39 and shall exclude any discrimination between producers or consumers within the Community’ and, further that ‘any common price policy shall be based on common criteria and uniform methods of calculation’.
The alleged infringement arises from the fact that the Italian business which buys paddy rice produced in Italy is being discriminated against in comparision with its competitors within the Community, because the latter obtain their supplies on the world market without having to pay the contract duty, and that this interferes with the proper working of the mechanisms used to implement the common policy on prices. Especially in the case of exports of the product to third countries, the discrimination is manifest from the moment when, in these circumstances, the Italian business receives the same refunds under Article 17 (2) of Regulation No 359/67 as those received by the other exporters who would not have been subject to the charge.
There is also discrimination on the Community market from the moment that the contract duty is left out of consideration in fixing the Community target price. The imposition of such a charge, therefore, changes the system of the formation of prices laid down by the Community and, to the detriment of Italian businesses, represents an additional cost for which there is no provision in Community rules.
The prohibition of discriminatory measures which compromise the common nature of criteria used in the formating of prices for rice has the effect of making the charge imposed by the Ente nazionale Risi illegal and of conferring the right on Italian businesses to have it refunded. This conclusion is confirmed by the fact that the application of the Italian enactment in question also infringes the general provision in Article 5 of the Treaty. Those are the considerations to which the Italian court has drawn attention.
The main purpose or the abovementioned provisions of Article 40 is to avoid the common organization of the markets being the source of discrimination between producers or consumers of agricultural products. The provisions do not therefore totally exclude the power of Member States, which is a factor outside the scope of the common organization of the markets, to continue imposing fiscal or quasi-fiscal charges on the products themselves or on related activities or operations.
Even if one takes account of the way in which, in practice, the activities of the Ente Risi have evolved, which has resulted in a substantial reduction in the importance of the functions it carries out for the direct benefit of the rice industry, the fact still remains that its activities are maintained for the benefit of the cultivation of rice in Italy and it can therefore be assumed that such activities must, however indirectly, also benefit Italian rice manufacturers who are the natural clients of Italian rice growers. The task of establishing whether, in the last analysis, the activities of the Ente Risi represents sufficient gain for the manufacturers to compensate them for the charges imposed on them would be a formidable undertaking and there is no guarantee that it would be possible to reach positive conclusions along these lines, as it might be if these conclusions were based on an agreed relationship between charges and benefits. Nor, in the last analysis, would it be easy to determine who meets this charge, at least as regards sales of the processed product within the Community.
It should be noted that, in laying down the prohibition on discrimination Article 40 refers expressly and exclusively to the treatment of producers and consumers. So far as this Article is concerned, therefore, it does not appear that the interest of traders and processers are vested with the same degree of importance as those of the two groups covered by the rule.
It must therefore be recognized that the situation, while possessing features which case doubt on its compatibility with the proper functioning of the common organization of the markets, is not basically of such a nature as to enable the national court to apply the prohibition on discrimination in the manner suggested by the plaintiff in the main action. The Commission's duty to keep under review the activities and prerogatives of State bodies which intervene in agricultural matters and to take appropriate action when, in its view, this is interfering with the proper functioning of the mechanisms of the common organization of the market for an agricultural product, calls for appraisals of fact and of economic considerations which are too complex for a national court to carry out satisfactorily. Apart from anything else, this involves a major administrative responsibility, not altogether free from political considerations. In case of the kind submitted for examination by the Pretore of Milan, it is therefore impossible to identify the existence of a right for individuals to invoke the prohibition on discrimination in order to escape their obligations and to obtain a refund of charges levied by a body charged by the State with carrying out activities for the benefit of a given national product.
With regard to the specific problem or discrimination arising from the absence of a refund of the charge when rice is exported to third countries, the plaintiff in the main action points out that discrimination arises even more clearly in that context because, despite being subject to the contract duty, the Italian exporter receives the same refunds as other exporters who are not subject to it. The existence and the amount of the loss would appear to be more easily identified in that situation than in the case of sales within the Common Market, where it is possible that, in the last analysis, the additional costs of raw material attributable to the contract duty is passed on, in part at least, to the final consumer. However, the task of establishing whether, because there has been no refund of duty, the Italian business enters the market in third States at a disadvantage compared with other Community exporters in turn demands complex research and appraisal. Wether there is any effective discrimination against Community producers who process paddy rice imported from third countries will depend among other things on the way in which, in practice, the provision of the third paragraph of Article 17 (2) of Regulation No 359/67 is applied. This provision refers to the need to strike a balance between the use made of basic Community products with a view to the export of processed goods to third countries and the use of products from these countries entering the processing traffic. As for businesses which sell rice coming originally from another Member State, whether there is a concrete situation adversely affecting the Italian rice-producing industries depends on the fiscal legislation of the other State concerned. In fact, so long as the existence of domestic duties imposed on one or other product which is subject to the common organization of the markets is not in itself prohibited under Community law in its present state of development, it will be necessary to establish in each specific case whether, in practice, there is in reality such a degree of discrepancy that it must be ironed out by invoking the appropriate procedure laid down in Community law. Apart from cases where Community mechanisms are the specific subject of a discriminatory national measure or, more generally, apart from cases where a difference of treatment introduced by national authorities is in itself wholly incompatible with the Community system (in which case there will be no need to assess the quantitative factors in order to establish that there is incompatibility), it is the task of the Community authorities, and not the national court, to establish the facts.
For the above reasons, and outside the restricted area directly covered by the prohibition imposed in the second paragraph of Article 40 (3), the general obligation placed on States by Article 5 has its most noticeable effect in this area when the competent Community authorities have carried out the intention embodied in the prohibition, as becomes necessary from time to time to ensure the proper functioning of the common organization of the markets. Article 5 (2) can certainly have the effect of barring certain actions or of preventing certain uses of national law (as in the Deutsche Grammophon Gesellschaft case already cited) but only if national law and the use made of it in practice clearly conflict with directly applicable provisions of Community law. On the other hand, the general obligation contained in Article 5 cannot confer the quality of direct applicability on a provision whose legislative content is insufficiently definite and clear.
The considerations set out above also serve, at least in part, as an answer to the second and third questions in which the Pretore of Milan asks us whether, when the rice is exported, the absence of a refund of the contract duty levied on paddy rice produced and processed in Italy is also an infringement of the third paragraph of Article 40 (3) and of the principles embodied in Regulation No 359/67/EEC of the Council (and set out specifically in Articles 2, 4 and 14, which deal with the target price, intervention price and threshold price respectively) on which the common system of prices in the rice sector is based.
The provisions in the third paragraph of Article 40 (3), which lays down that the common price policy shall be based on common criteria and uniform methods of calculation, is concerned with an aspect of the prohibition on discrimination which we have recognized as having direct application. The existence of national taxes levied on products which are subject to the common rules of the markets is not in itself incompatible with such criteria and uniform methods of calculation. A charge like the contract duty does not in fact directly impinge on the application of the common criteria and methods of calculation which are at the root of the common organization of the market in rice, so that its existence is not in itself incompatible with this provision of the Treaty. And if its practical effect is to override the internal protective measures of the common market or measures of support for Italian produce when exported in order to compete with products originating in third countries, or if it places users of Italian paddy rice at a disadvantage compared with their competitors in the Community market or on exportation, it is again the task of the Community executive to take appropriate steps to correct the position.
If it is true that charges of the type which are submitted for consideration by the Pretore of Milan are not taken into account in fixing the levy, one cannot ignore the fact that in certain cases a charge imposed on the processing industry in the case of a national product may frustrate one of the essential purposes of the levy, which is to protect Community output, an objective which covers the processing industry as well. Whenever cases of this kind are identified the Commission should intervene to eliminate the distortion either by ensuring that the amount of the levy is changed, or by obliging the State concerned to amend its domestic legislation so as to remove the source of mischief. But this is a question of fact always for submission in the first place to investigation and appraisal by the Community executive.
With regard, in particular, to intervention prices, it must be pointed out that these only cover paddy rice and are therefore essentially for the benefit of growers which, generally speaking, rules out the possibility that the rice-producing industry can have any direct interest in the application of this provision. The fourth question, which asks whether the provisions of paragraphs 2 and 3 of Article 40 (3) of the EEC Treaty are of direct application, has been answered by what has been said on the previous question.
In the fifth question, the Italian court asks us whether the imposition of the contract duty can constitute an infringement of the principle of Community preference. Here, too, the answer is implicit in the considerations set out above. In itself, the existence of a contract duty is not such as to constitute a breach of the principle of Community preference. The possibility of an infringement remains but, because its identification depends on an appraisal of quantitative factors and its abolition may be brought about in a variety of ways, the choice of which is also the subject of considerations of expediency on the part of the Community executive, this task falls to the Commission and not the national court, always subject, of course, to the jurisdiction of this Court in the event of an action against the Commission.
The Pretore of Milan asks further whether a special payment of the same type as the contact duty can constitute a charge having equivalent effect to a customs duty on exports or a measure having equivalent effect to a quantitative restriction on exports, in infringement of Articles 20 (2) and 23 (1) of Regulation No 359/67.
The contract duty is applied to rice produced in Italy, regardless of whether it is exported or consumed within the State. Consequently, the application of the duty depends on the territorial origin of paddy rice which is subject to a change of ownership or industrial processing; it does not depend on the fact that it has crossed the State frontier.
Again, the contract duty, which is certainly not imposed for the purpose of restricting the export of Italian rice, represents a domestic measure of a quasi-fiscal nature and, as such, is different in construction and scope from quantitative restrictions on exports. Although, because it affects only the national product, a duty of this kind could theoretically have the effect of discouraging exports to other Member States or to third countries, it still bears no resemblance to a quantitative restriction on exports in view of the fact that, even if found to exist, this effect would be wholly indirect.
The area over which such a possible effect might be felt would, however, be greater in the context of the prohibition on a charge having an equivalent effect to export customs duties. It is true that there is nothing in the Treaty imposing a general obligation on Member States to reimburse taxes and domestic charges when products on which they have been paid are exported. But we are dealing here not with a charge which forms part of a general system of domestic taxation but with a special levy imposed on a given agricultural product for the specific purpose of financing the activities of a particular public body: the absence of any refund of the charge, when the final product coming from the raw material is exported, could represent an infringement of the prohibition laid down in the first paragraph of Article 20 (2) and the first paragraph of Article 23 (1) of Regulation No 359/67/EEC, when the duty borne by the processing industry is not balanced by any benefit from the activities of the body which it is obliged to finance.
We have already noted that this charge, levied in connection with activities carried out by a body for the benefit of national price production, might, in the final analysis, be the source of benefit for rice industries which would be the natural users of paddy rice harvested in Italy. We cannot therefore dismiss the possibility that even the absence of any refund of the contract duty on export may be economically justified, since, by contributing to the production and marketing of rice in Italy, the services rendered by the Ente Risi also benefit the export trade.
For these reasons, and in view of the limits within which the Court must exercise the powers conferred upon it in Article 177, it is not possible at this stage to regard the levy in question as a charge having equivalent effect to a customs duty on export.
Finally, the national court asks whether the imposition of the levy under consideration constitutes an abuse of a dominant position, prohibited under Article 86 of the EEC Treaty.
The question is not based on abuse arising from an excessive level of the contract duty but simply from the Ente's power to demand it.
It is not difficult therefore to reply that, in its capacity as a body entrusted with a public service, the Ente not only can, but must, apply the law which set it up and which governs its functions and activities. As no claim has been made in the present case that there is abuse arising from the level of duty fixed by the Ente, it could not in any case be reproached for having correctly applied the law under which it operates, so long as the law is not found to be contrary to Community law. The last question must therefore be answered in the negative.
Before summarizing the answers which I propose to give to the specific questions put by the Pretore of Milan, I believe it desirable to mention a problem discussed by some of the third parties during the oral hearing. It concerns Community procedure rather than Community law.
Referring to the critical comments which the Italian Government made in its observations, referring to the fact that all parties were not heard in the proceedings before the national court, the representative of the Commission mentioned the debate now developing in an Italian court over the possibility in national law of a reference to this Court for a preliminary ruling in the course of proceedings for an injunction, in view of the special characteristics of those proceedings, which take place without the other party being heard.
It must be said at once that the power of national courts to refer to this Court for a preliminary ruling is provided for and governed by Community law, not national law. The letter and the spirit of Article 177 combine to bring within the jurisdiction of the Court of Justice all cases where a national court finds it necessary to resolve a doubt on a point of Community law which it regards as having a bearing on its decision. Action by the court, such as is provided for in proceedings for an injunction, falls into this category, as this Court decided in its judgment of 14 December 1971 in Case No 43/71 (S.a.S. Politi, Rec. 1971, p. 1048). Nor can it be objected that, because all parties have not been heard, the court is not in a position to tell whether there is any problem of interpretation or validity: as we know well enough, it is not essential for the issue to be raised by the parties and the fact that the national court believes it necessary to settle a doubt before it gives its decision is, generally speaking, sufficient justification for a reference to this Court. Moreover, without the need to go into the merits of the legal arguments based on national law, it seems scarcely compatible with the spirit and purpose of the system established by Article 177 of the Treaty, and with the general duty placed upon the States in Article 5, for a national court to find itself accused of acting illegally according to its own national law, solely because it had used a power conferred on it by Article 177.
On the other hand, we can see that the special nature of the proceedings for an injunction can impinge on the application of the procedural rules governing proceedings for a preliminary ruling. As the decision of the Court of Justice is, of course, binding on the court from which the reference originated, the principle, vital in any kind of procedure, that the rights of the parties must be protected makes it imperative that the parties be given an opportunity of being heard, even on the subject of the interpretation of Community law; for this reason, the provision of Article 20 of the Protocols on the Statute of the Court of Justice under which the parties to the main action must be given an opportunity to submit their observations must be suitably applied in the present case. As in interlocutory proceedings, the subjects of the dispute are not always parties in the proceedings, the rule in Article 20 must be applied — as indeed it was in this case — on the basis that the parties for whom an opportunity must be provided to submit their observations must be taken to embrace both the subjects of the dispute, even through they have no official standing as parties in the special type of interlocutory proceedings in which judgment is given before any defence is heard.
To conclude, after placing the questions put by the Pretore of Milan in a logical order slightly different from the one in which they were submitted, I propose to answer them as follows:
1.
The second and third paragraphs of Article 40 (3) of the EEC Treaty do not constitute a general and automatic prohibition against Member States allowing a public body which carries out activities for the benefit of a given sector of the agricultural industry to impose special charges based on a fixed sum of money payable on every quintal of the product covered by such activities.
2.
The provisions of the second and third paragraphs of Article 40 (3) of the Treaty can be regarded as being directly applicable in the legal systems of Member States, giving rise to subjective rights in favour of individuals which the national courts must protect in respect only of measures which directly impinge on the mechanisms provided by the common organizations of the markets. In the rice sector, this direct effect on national measures was felt from the date when Regulation No 359/67/EEC entered into force.
3.
The prohibition on discrimination contained in Article 40 (3) does not create rights in favour of individuals from the fact that, on export of a processed product, there is no refund of an internal charge levied on purchase of home-produced raw material.
4.
The obligation created for the Community by the prohibition on discrimination in Article 40 (3) does not imply that it must eliminate all cases of incompatibility arising under national laws at the same time that it creates the common organizations of the agricultural markets.
5.
Imposition of a charge of the kind referred to in 1. above does not in itself constitute an infringement of the principle of Community preference.
6.
A special charge applied to purchases of home-produced paddy rice does not, in the absence of a refund when the processed product is exported, constitute a charge having equivalent effect to a customs duty on exports, prohibited under the first paragraph of Article 20 (2) and the first paragraph of Article 23 (1) of Regulation No 359/67/EEC, so long as the charge attracts corresponding benefit from the services provided by the authority for those who pay it. Imposition of the charge does not constitute an infringement of the second paragraph of Article 20 (2) and the second paragraph of Article 23 (1) of Regulation No 359/67/EEC, which prohibit the introduction of measures having equivalent effect to a quantitative restriction on exports.
7.
Considered by itself, i.e. regardless of its actual impact on the economy and the nature of any counter-benefit from the authority, the imposition of the charge cannot constitute an abuse of a dominant position under Article 86 of the Treaty.
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1
)	Translated from the Italian.