61978C0238
OPINION OF MR ADVOCATE GENERAL CAPOTORTI
DELIVERED ON 12 SEPTEMBER 1979 (
1
)
Mr President,
Members of the Court,
1.
The opinion which I have to deliver today concerns applications submitted by undertakings from France, Germany, Belgium and the Netherlands, some of which produce gritz, and others quellmehl. As you know, gritz is a type of maize meal used in the brewing of beer, whilst quellmehl is derived from processed maize or common wheat and is used mainly-in bread-making. For some time now the two types of undertaking have enjoyed equality of treatment in the context of the Community regulations on production refunds; in particular, Article 11 of Regulation No 120/67 of the Council of 13 June 1967 (on the common organization of the market in cereals) provided for compulsory refunds to be paid to both types of undertaking and also to starch producers, taking account of the ‘interchangeability of starches with quellmehl and maize groats and meal’ (see the 10th recital of the preamble to the said regulation). Subsequently, however, whereas the refund for starch was retained, the refund payable for the production of quellmehl and gritz was abolished; Regulations Nos 1125/74 of the Council of 29 April 1974 and 665/75 of the Council of 4 March 1975 amended the wording of the said Article 11 of Regulation No 120/67, so as no longer to provide for refunds in favour of first one, then the other, of the products in question.
The undertakings affected by the abolition of Community aid reacted in the legal sphere by pursuing two different courses: actions were brought in the courts of Member States against the national authorities competent to grant the refunds and proceedings were instituted in this Court against the Council to obtain compensation under Article 215 of the EEC Treaty for the damage caused by the repealing provisions. In this regard I note that two of the cases presently awaiting judgment originated with actions brought against the Council in 1976: I speak of the applications lodged by the Dumortier Freres and Maïseries du Nord companies, on 18 July and 2 December of that year respectively. But before giving judgment on those applications, the Court of Justice has already had occasion to give a ruling pursuant to references for preliminary rulings submitted by national courts (the Finanzgericht, Hamburg, on the one hand and, on the other hand, the Tribunaux Administratifs, Nancy and Chalons-sur-Marne), which references gave rise to Joined Cases 117/76 and 16/77 and to Joined Cases 124/76 and 20/77.
You will recall that those cases ended with two parallel judgments dated 19 October 1977 ([1977] ECR 1753 and 1975); in those judgments the Court ruled that the legal situation created by the said Regulations Nos 1125/74 and 665/75, repealing by implication the rules which provided for compulsory-refunds for quellmehl and gritz, was incompatible with the principle of equality, in that the refund had been retained in the competing sector of maize starch. As for the measures necessary to correct that incompatibility, the Court declared that such measures should be adopted by the Community institutions competent in matters of common agricultural policy. Thus the Court did not declare invalid the implied repealing rules contained in the above-mentioned regulations, but declared unlawful the conduct of the Community legislature in abolishing the refunds for gritz and quellmehl and left it to the Council and Commission to decide on the measures necessary to correct that illegality.
Following that decision, Council Regulations Nos 1125 and 1127/78 of 22 May 1978 — complemented by the Commission's implementing Regulation No 1570/78 of 4 July 1978 — restored the equality of treatment between starch, quellmehl and gritz, until the end of the 1978/79 marketing year. It did so by reintroducing the production refunds for maize and common wheat used in the manufacture of quellmehl intended for use in the bakery industry, and for maize used to produce gritz intended for the brewing industry. However it was laid down that those provisions should take effect as from 19 October 1977: on the application of the interested parties, the refunds may be granted as from that date (which coincides with the date of the aforesaid judgments of the Court). On the other hand, the situation created by the repealing provisions of 1974 and 1975 was not altered in respect of the period between the day on which those provisions took effect (1 August 1974 for quellmehl, and 1 August 1975 for gritz) and 19 October 1977. Thus it is in relation to that period that the applicants submit their claims for compensation.
The aspect common to all the actions lies in the claim that the Community be ordered to pay sums equivalent to the unpaid refunds for the above-mentioned period. Some of the French undertakings producing gritz add a claim for compensation for further losses, which they claim to have sustained as a result of the abolition of the refunds between August 1975 and October 1977. They allege that the abolition made it very difficult for them to operate, causing heavy financial losses and, in one case, the total cessation of the undertaking's activity. The group of German, Belgian and Netherlands undertakings producing gritz, and also the applicant in Case 238/78, Ireks-Arkady, a producer of quellmehl, claim in the alternative that the Council be ordered to ‘authorize and compel’ the Member States concerned (the Federal Republic, Belgium, Netherlands) to pay the applicants sums equivalent to the refunds not received.
It should also be noted that the applicants in Cases 238/78, 261/78 and 262/78 calculate the compensation by reference to the quantities of quellmehl used in any sort of food for human consumption, and not just for bread-making. The Ireks-Arkady undertaking thought it appropriate also to submit a request for clarification on this matter; it would like the Court to interpret Articles 2 and 4 of Commission Regulation No 1570/78, by ruling that the production refund for quellmehl is payable whenever the product is sold for human consumption. Finally the Interquell undertaking has included in the amount of compensation requested the sum corresponding to the production refunds for quellmehl intended for animal feed and not only for human consumption.
2.
The defendants have raised several pleas of inadmissibility. I think it is possible to examine those pleas before discussing questions of substance. I shall begin by considering those of general scope (even though not all have been raised in all the cases), dealing subsequently with those which relate to certain of the actions in particular.
The first objection may be summarized in the following terms: what the applicants are asking for is the amount of the production refunds for the above-mentioned period; but the payment of the refunds in agricultural matters falls within the sphere of competence of the national institutions responsible for the management of the Community agricultural policy within each Member State, and therefore the applications should have been addressed to those institutions, legal proceedings if necessary being brought before the national courts. Then those courts could, whenever they considered it necessary, have submitted references for preliminary rulings to this Court under Article 177 of the EEC Treaty.
It seems to me that, in order to appraise the merits of this objection, it is essential to identify the legal actions brought by the applicants; for that purpose, account must be taken not only of the petitum, that is to say the remedy requested, but also of the causa petendi, that is to say the right on which the application is based. Although the sums claimed by the applicants are equal to the refunds which they did not receive for the period between the entry into force of the repealing measures and 19 October 1977, none the less they claim those sums now by way of compensation for damage, knowing full well that the absence of specific regulations covering the aforesaid period would disable them from claiming those sums as refunds! To refer the applicants to the national courts would, in this situation, be to offer them a form of action doomed to failure: in fact, an action for damages before the national courts would be out of order in that the damage derives from acts of the Community institutions and must therefore be judged by this Court under Articles 178 and 215 of the EEC Treaty; whilst an action for the payment of the refunds would have to be dismissed, there being for the period in question no rules of secondary Community law authorizing or compelling the national institutions to pay refunds for gritz or quellmehl.
The case-law of this Court, cited by the Council in support of its argument, may not in my opinion be relied on to show that it is well founded. In Case 99/74 Societe des Grands Moulins des Antilles v Commission [1975] ECR 1531 (judgment of 26 November 1975), the applicant claimed to satisfy, under the Community law in force, all the conditions for the payment of certain refunds; having attempted without success to obtain them from the national administrative authorities and subsequently from the Commission, it submitted a claim against the latter for compensation for the damage which it had been caused by the institution's implied refusal. The Court found that the applicant was attempting to obtain payment by the Community, instead of by the competent authority of the State in question, of sums payable to it under Community law (paragraph 21 of the decision), declared that it was for the national courts to give a ruling on the legality of the refusal of payment in pursuance of Community law (paragraph 23), and concluded that ‘since the applicant has failed to allege damage arising from an act or an omission of the Community capable of affecting it adversely, its application is inadmissible under Article 178 of the Treaty’ (paragraph 25).
In this case the situation is entirely different. Indeed the applicants are not claiming that the current Community regulations on the question of production refunds for cereals entitle them to obtain such refunds for the quellmehl and gritz produced in the period from August 1974 (1975 in the case of gritz) to 19 October 1977; therefore they do not raise any question of a mistaken appraisal of their qualification for Community aid. Instead the applicants rely on the damage flowing from the infringement of the principle of equality on the part of the Council; which infringement has not yet been remedied for the period in respect of which Regulations Nos 1125 and 1127/78 did not restore equality of treatment between producers of starch, quellmehl and gritz. Therefore, in accordance with the Court's ruling in paragraph 25 of the decision in the judgment cited, the present applications appear to be admissible as regards this point.
Similar considerations may be applied to the judgment of 27 January 1976 in Case 46/75 IBC v Commission [1976] ECR 65. In that case the applicant, which had been obliged to pay certain sums to the Italian customs authorities in pursuance of a Community regulation the validity of which it challenged, wished to recover the amount paid by means of an action for damages against the Commission. The Court found that the application concerned the legality of the imposition of the sums in dispute and sought the reimbursement by the Community of the sums which were said to have been improperly charged; it recognized that under Community law the imposition was a matter for the national authorities and it concluded therefore that it was for the national courts to rule on the legality of the conduct of those authorities, after using where necessary the procedure under Article 177 of the EEC Treaty to ascertain the validity of the Community provisions applied. But in the cases now before the Court, the applicants' chances of obtaining the sums which they claim do not depend on the validity or otherwise of the Community provisions which compelled the national authorities to reject their claims. Let us not forget that the Court has already been questioned on the validity of the provisions abolishing the refunds for quellmehl and gritz contained in Regulations Nos 1125/74 and 665/75, and that it declared that the legal situation brought about by that abolition was unlawful, instead of declaring invalid the articles which effected the repeal. Therefore the applications with which we are concerned now are, as we have seen, based on the assumption that the different treatment accorded to the producers of quellmehl and gritz, in relation to producers of starch, is incompatible with Community law; and it seems logical, and legitimate, that the harmful consequences for individuals of an unlawful act committed by the Community institutions should be challenged by means of an action for damages against those institutions. In the event, I think it proper to refer also to my opinion in the recent Case 90/78, Granaria.
The argument developed above might be criticized by someone who considered the present applications a means of challenging the lawfulness of Regulations Nos 1125 and 1127/78, for having reintroduced the refunds for producers of quellmehl and gritz with effect only from 19 October 1977. I should like to return to that point later, for the purpose of determining the precise nature of the unlawfulness on which the claims for compensation are based. However, I think it appropriate to emphasize immediately that those claims — as was repeated several times in the course of the written procedure and the oral procedure — are designed to obtain compensation for the damage caused by the unlawful act, which was established by the Court in the judgments of 19 October 1977, and which took the form of an infringement of the principle of non-discrimination to the detriment of the producers of gritz and quellmehl.
3.
A second alleged ground of inadmissibility is based, essentially, on the claim that the real aim of the applicants — to obtain the benefit of the refunds for the period in which they were denied them — is attainable only by means of the adoption of a new regulation; but if an objective of that type cannot be obtained through the actions provided for in Articles 173 and 175 of the EEC Treaty, it cannot be attained by means of an action for damages either. It is convenient to examine that objection together with the third one, pleaded in that group of cases in which the applicants claim in the alternative that the German, Belgian and Netherlands Governments be authorized and compelled by the Council to pay the sums corresponding to the refunds granted hitherto; in this regard the Commission objects that to request a decision addressed to persons other than the applicants is precluded by the third paragraph of Article 175 of the EEC Treaty, and similarly should be considered to be precluded in the context of the procedure provided for bv Article 178.
These two objections appear to be based on the same reasoning, in so far as the restrictive conditions placed by the Treaty on actions for the annulment of Community acts or for failure to act on the part of the institutions are transferred to actions for damages, on the basis of an argument that, if the result which the applicant wishes to obtain is substantially the same as that which would be produced by one of those two actions, the restrictions must also be the same. In fact, such a transfer is arbitrary. On several occasions this Court has seen fit to state that the action for damages under Articles 178 and 215 of the Treaty was set up as an autonomous procedure with a particular function within the framework of legal remedies and subject to conditions appropriate to its specific purpose: see judgments of 2 December 1971 in Case 5/71 Aktien-Zuckerfabrik Schoppenstedt v Council [1971] ECR 975; of 13 June 1972 in Joined Cases 9 and 11/71 Compagnie d'Approvisionnement, de Transport et de Credit v Commission [1972] ECR 391; of 24 October 1973 in Case 43/72 Merkur v Commission [1973] ECR 1055 and of 2 July 1974 in Case 153/73 Holtz & Willemsen v Council and Commission [1974] ECR 675. In all those cases the action for damages was held admissible, although the defendant institutions had pleaded that it was really-aimed at obtaining the same results as an action for annulment or an action for failure to act, by avoiding the restrictions imposed by Articles 173 and 175 of the EEC Treaty.
In view of that and having regard to the plea of inadmissibility of general scope which I went into above; I would point out that it does not appear correct to regard the applicants' claims as a means of obtaining the adoption of a new regulation, and still less correct to say that granting such claims would inevitably lead to the adoption of such a regulation in order to recognize the right of producers of gritz and quellmehl to draw refunds in respect of the disputed period. The case-law cited above, in emphasizing the independence of the action for damages and its difference from the action for annulment or the action for failure to act, shows that the action for damages, if successful, leads to the payment of sums of money to the victims of the damage (that is to say of course, to the victims who brought legal proceedings). That will happen in these cases, if the applicants' claims are upheld: the Community will have to pay them certain sums of money, sufficient to compensate them for the damage according to criteria which will be laid down in your judgment. A new regulation on production refunds would not in my opinion be absolutely necessary; at any rate, not for the purpose of granting the applicants the compensation which would be the direct consequence of the judgments of the Court. Admittedly, if equality of treatment were to be restored on a general level in favour of the producers of gritz and quellmehl in relation to the producers of starch, with retroactive effect as from the very day on which the provisions abolishing the production refunds took effect, the ery basis of the action for damages d disappear; but that does not mean it the successful outcome of this action must lead to the adoption of measures of a general nature.
Different considerations apply to the other objection of inadmissibility, namely that which has been raised against the claims in the alternative made by some of the applicants, in Case 238/78 and Joined Cases 241, 242 and 245 to 250/78. In the course of the written procedure, the applicants stated that their claim in the alternative was intended solely to save the Court the trouble of ascertaining certain matters of fact, and that in the absence of a dispute about the quantities of quellmehl or gritz produced, they would not have maintained the claims in question. But I think it equally appropriate to note that, a claim that the Council be ordered to compel certain Member States to pay certain sums to the applicant undertakings is not admissible in the context of a procedure based on Articles 178 and 215 of the EEC Treaty. Indeed, either the payment should be made by way of compensation for damage, which would presumably be ascertained by means of the present actions, and in that case it is difficult to see on what legal basis the Community could impose upon one or more Governments of Member States the burden of paying compensation for damage caused by an act of the Community institutions; or the payment should be made by way of refunds, and in that case it would in effect be necessary, at the Community level, to adopt a new regulation, which the applicant undertakings cannot in any case legitimately request. In fact that would involve a legal measure, of general scope, quite different from the economic measures, of particular scope, which are the result of a successful action for damages.
While on the subject of objections of inadmissibility based on statements of principle, it is necessary to devote a few words to the argument that the above-mentioned claims in the alternative seek to obtain a sort of restitution in kind and are therefore inadmissible, there being no place for such a form of reparation in public law. I believe it unnecessary to ascertain whether that point is correct or not, as I cannot accept that the claims in question seek to obtain a restitution in kind. In my opinion, the line dividing compensation and restitutio in integrum coincides with the distinction between the payment of a sum of money and the provision of a benefit of another sort, suitable to restore the property of the victim of the damage (for example the repair of the damaged object). There is no doubt that every form of compensation for damage serves to restore the property of the victim to the condition in which it would have been if the harmful act had not taken place; but the payment of a sum of money should always be regarded as compensation, even when the damage consisted in the denial of certain monetary amounts. Further proof of that is the fact that the claim for compensation is normally accompanied by a claim for interest. With regard to the present case, it is useful to emphasize once again that the object of the applicants' claims (principal and alternative) is not the recovery of the production refunds, but the payment of sums of money equivalent to the unpaid refunds. Therefore I find the objection in question unfounded.
4.
A plea of lis alibi pendens has been raised by the Council in the cases brought by the seven French companies which produce gritz, on the grounds that, after asking the ONIC, a French agricultural intervention agency, to pay it the production refunds for the period from 1 August to 31 December 1975, they challenged the refusal of that authority before the competent French court, asking for the decision to be annulled. In three of those judgments the decision refusing payments was annulled, in view of the judgments of 19 October 1977 of this Court in Cases 167/78 and 28/79, delivered as a result of references for preliminary rulings from two of the administrative courts in which the companies concerned had brought actions (the annulment was ordered by judgments of 31 July 1978 of the Tribunal Administratif, Nancy, on the application of Moulins-Huileries de Pont-à-Mousson, of 12 December 1978 of the Tribunal Administratif, Châlons-sur-Marne, on the application of the Cooperative Providence Agricole de la Champagne, and of 11 May 1979 of the Tribunal Administratif, Orleans, in the case concerning Maïseries de Beauce). Subsequently ONIC appealed to the French Conseil d'État against the judgment of the Tribunal Administratif Nancy, whilst it appears to have allowed the judgment of the Tribunal Administratif Châlons-sur-Marne, to become final.
It is well-known that a situation of lis alibi pendens in the strict sense of the term implies that the same action is pending before two courts, with the same parties, the same subject-matter and the same claim. The Council seems to consider that it is possible to speak of lis alibi pendens in the relationship between a national court and the Community Court, even where the defendant before the Community Court is a Community institution, whilst before the court of a Member State the defendant is a national agency entrusted with the management of the Common Agricultural Policy. Without going into questions of terminology, it will readily be understood that the relationship between two judgments in actions brought by the same applicant against the Community institution and against the national management agency raises questions of priority, if at least the subject-matter and the claim are identical. But in this case that is certainly not so: between an action for the annulment of an act and an action for damages there is a clear difference in subject-matter and legal basis. And a decision to annul an act leaves aside completely the question whether the applicant is or is not entitled to compensation for any damage sustained.
In this case, the Council pleads lis alibi pendens on the ground that, in its view. the same dispute in which certain sums are claimed has been put to the national courts and to the Community Court. However the Council is well aware that the French administrative courts, which have already judged the actions brought by some producers of gritz. could not go beyond a judgment annulling ONIC's refusal to pay the production refunds for the period subsequent to 1 August 1975; and in fact they were able to pronounce that annulment only in so far as the Court of Justice had, by the said judgments of 19 October 1977, given the reply, with which we are familiar, to the references for preliminary rulings which had been submitted to it. The applicants' interest in obtaining the sums of money equivalent to the unpaid refunds cannot be satisfied by decisions of national courts in the absence of the provisions of Community law without which the national authorities cannot make payments on behalf of the European Agricultural Guidance and Guarantee Fund. That is why the interested parties chose to bring an action for damages, which action is by its very nature radically different from the actions brought in the national administrative courts, as I have already said above. Therefore, how can it be said that the same dispute has been submitted to two different courts?
According to the defendant institution, the actions under Articles 178 and 215 are in any case inadmissible, because the applicants could bring an action before the national administrative courts, in which action such courts have unlimited jurisdiction, and such an action, seeking to obtain payment of the production refunds, would lake precedence over the action for damages. It seems to me obvious that, if one speaks of the relationship between the action for damages, which is an actual fact, and a hypothetical action before the national administrative courts, in which action such courts have unlimited jurisdiction, (a hypothetical action because such an action has not actually been brought), one is going outside the confines of the alleged lis alibi pendens. As for the theory that the appropriate form of action is an action for the payment for the refunds, to be brought in each Member State, I think it superfluous to repeat the objections already expressed when I considered the first objection of inadmissibility, of general scope, based on that idea.
In support of the plea of lis alibi pendens the Council cited the judgment of 14 July 1967 of the Court of Justice in Joined Cases 5, 7 and 13 to 24/66 Kampffmeyer v Commission [1967] ECR 245. However I do not think that the Council's point of view is confirmed by that decision. In fact the applicants in the Kampffmeyer cases had commenced two actions for damages, one against the Federal Republic before a German court, the other against the Community before the Court of Justice, on the ground that they had sustained damage as a result of an act considered unlawful both in Community law and in German law. The Court declared that it was ‘necessary to avoid the applicants' being insufficiently or excessively compensated for the same damage by the different assessment of two different courts applying different rules of law’, and therefore held that, before determining the damage for which the Community should be held liable, the national court should have the opportunity to give judgment on any liability on the part of the Federal Republic of Germany. Obviously that assertion was determined by the situation described and, in particular, by the fact that the actions brought before the two different courts were both actions for damages. In this case that circumstance does not recur, and it is therefore inappropriate to refer to that judgment.
In conclusion, it must be said that the fact that actions are pending before French administrative courts for the annulment of the decisions of the ONIC against the producers of gritz (decisions refusing to grant refunds for the periods subsequent to 1 August 1975) may not constitute a ground for considering inadmissible the actions for damages brought against the Council before this Court.
5.
A particular problem of admissibility arises in the context of Case 238/78 brought by the Ireks-Arkady company, which is acting by way of subrogation to the victim of the damage on the basis of an assignment of the right to compensation (that is to say, the disputed debt). The victim of the damage was another company belonging to the same group, namely the Ruckdeschel company, which had previously sought to establish its entitlement to the production refunds (for the period in question) by means of an action before a German court which led to a reference for a preliminary ruling — Case 117/76.
The Commission points out that not all the legal systems of the Member States permit the assignee of a right to compensation for damage resulting from an unlawful act to bring legal proceedings. In panicular such a possibility is precluded in English law. Therefore the Commission raises the question whether the action in point is in accordance with the general principles common to the laws of the Member States referred to in the second paragraph of Article 215 of the EEC Treaty. Moreover, the Commission is afraid of the possibility of an abuse of assignments of rights which might lead to the risk of certain undertakings specializing in bringing actions for damages against the Community in respect of rights originally belonging to third parties.
A.s regards this last point, it may be observed that in the case in question the assignee of the right to compensation and the victim of the damage, in spite of being different persons legally, are not entirely unrelated. In fact the Ruckdeschel company has assigned its entire assets to the Ireks-Arkady company (which now constitutes a holding company), in return for a financial stake. We are well aware that the fact that several undertakings belong to the same economic group has been considered on several occasions, both by the Commission and by the Court, to be a sufficient reason for regarding those undertakings as substantially the same entity, as regards the appraisal of their conduct on the market. Treating as a unit formally separate legal entities has produced important consequences in the field of Community competition law. In view of that, I think there is justification for saying that where an assignment of rights to compensation has taken place between undertakings belonging to the same group, the dangers feared by the Commission do not exist.
In fact the Commission recognizes that in this case the assignment does not constitute a procedural device and cannot be regarded as abusive. However the Commission considers that that is not sufficient to overcome the difficulties resulting from the absence in Community law of a rule relating to the assignment in question and from the lack of uniformity in the internal laws of the Member States, at least as regards the effects of an assignment of a debt vis-à-vis the debtor, and as regards the procedural aspects of the matter.
In my opinion, Article 215 of the EEC Treaty does not prejudge the matter. That provision governs the non-contractual liability of the Community (and therefore the criteria on which that liability is based, the limits within which it exists, the results to which it leads), but not a circumstance such as the assignment of the right to compensation, which has only an incidental connexion with such liability, and which depends on a wider legal category, namely the assignment of debts, which is governed by the national systems of contractual law. The fact that the subject-matter of a contract of assignment is the right to a debt (still disputed of course) originating in an unlawful act which is the source of the non-contractual liability of the Community does not seem sufficient to establish such a close and direct relationship between the assignment of the debt and the unlawful act of the Community as to bring the contractual act of disposing of the right between individuals within the provisions on the non-contractual liability of the Community. The law applicable to contracts between individuals is the internal law of each Member State and I do not think that there are sufficient grounds for detaching the contract assigning the debt owed by the Community from that legal system. Moreover the Court has recognized as much, through the order of its President made on 25 September 1963 in Case 85/63 [1963] ECR 195, which referred to the Belgian Civil Code with regard to the assignment by an official of the Commission of his salary to a Belgian company.
Thus it follows that the Community law on liability attaches no importance to the way in which the law of the individual Member States governs the assignment of the right to compensation for non-contractual damage. The right of the assignee to bring proceedings under Article 215 of the EEC Treaty must be recognized whenever it has validly obtained, under the internal provisions applicable, entitlement to the debt belonging originally to the victim of the damage. In this case I do not think that anyone has challenged the propriety, from the point of view of German law, of the assignment that has taken place between Ruckdeschel and Ireks-Arkady (German law is moreover one of the least formalistic in this regard), or the ability of such an assignment to have effect as against the (potential) debtor. Therefore the action brought by the Ireks-Arkady company must be regarded as admissible.
Still within the context of Case 238/78, a second objection raised by the Council is based on the assumption that the application arises, at least partially, from an unlawful act resulting from the limitation in time placed on the refunds by Commission Regulation No 1570/78; it is not permissible, argues the Council, to challenge it on account of a wrongful act of the Commission. That objection is obviously very weak; it would be sufficient to reply that the limitation in time of the right to ask for arrears of refunds is a result of Council Regulations Nos 1125 and 1127/78, rather than of Commission Regulation No 1570/78, and that in any case both the Council and the Commission are defendants in Case 238/78. But there is another, more important, defect in the objection, as was properly pointed out by the applicant: the unlawful act from which the claim for compensation arises is the infringement of the principle of equality resulting from the amendments introduced in 1974 and 1975 to Article 11 of Regulation No 120/67 of the Council and to that act there is not added another unlawful act arising from the latter regulations of 1978: at most it may be said that the latter regulations did not entirely correct the situation of incompatibility with the aforesaid principle of equality.
Finally, there is a third objection of inadmissibility raised by the defendants against the claim for a declaration contained in Application 238/78. That claim seeks, as I pointed out at the beginning, a declaration by the Court that Articles 2 and 4 of Commission Regulation No 1570/78 must be interpreted as meaning that there is entitlement to the production refunds for quellmehl whenever it is sold, without further processing and without being mixed with other substances, exclusively for use in food for human consumption.
I find this objection well founded. Generally speaking, a request for a declaration may be considered admissible in the context of an action for compensation for damage not arising under a contract if it is a question of establishing the interpretation of a provision on which depends the existence of the unlawfulness or of liability or of the right to compensation. In this case, however, Regulation No 1570/78 has nothing to do with establishing the existence of the unlawful act or of liability: we saw that before when examining the second objection raised by the Council in the same case. The interpretative declaration requested really concerns the right to the production refunds, not the right to compensation for damage. Finally, it may be pointed out that the subject-matter of the present cases is limited to the consequences of the abolition of the refunds in favour of producers of quellmehl or gritz for a period prior to 19 October 1977, whilst the request for interpretation refers to the regulation producing effects subsequent to that date. Therefore that regulation cannot even be considered an argument in support of the claim for compensation regarding quellmehl used for human consumption in industries other than the bakery industry.
6.
Having overcome the objections of inadmissibility which were raised against the main claims, I now go on to examine the questions of substance. I believe that, in view of the nature of the actions, it is appropriate to ascertain first of all what is the unlawful act for which the Community is alleged to be liable, and to what extent it may be said that the existence of that unlawful act has already been established.
In the sequence of events which led to the present cases the following matters were of decisive importance: above all the abolition of the refunds for quellmehl and gritz by virtue of Regulations Nos 1125/74 and 665/75; then the judgments of the Court of Justice of 19 October 1977; finally, the regulations of the Council and the Commission which reintroduced the refunds for the two products in question with effect from 19 October 1977. We know that the said judgments established the unlawfulness of the abolition of the refunds, on account of the disregard of the principle of equality (see paragraphs 10 and 11 of the decision in Joined Cases 117/76 and 16/77; paragraphs 23 and 24 of the decision in Joined Cases 124/76 and 20/77). The unlawful act, in respect of which we must establish whether the Community is liable for the damage caused, is therefore precisely this: The Community institutions, by amending Article 11 of Regulation No 120/67 by means of Regulations Nos 1125/74 and 665/75, infringed the general principle of equality vis-à-vis the producers of gritz and quellmehl, which principle ‘is one of the fundamental principles of Community law’ (paragraphs 7 and 16 respectively of the decisions in the two cases).
The same assertion has been made several times by the applicants, but their position has not always been consistent on this matter, in so far as they have sometimes shifted the emphasis to the alleged unlawfulness of Council Regulations Nos 1125 and 1127/78 (and of the Commission regulation which implemented them: No 1570/78). Those regulations, which restored the refunds only with effect from 19 October 1977, allowed the situation of unlawfulness established by the Court to continue in respect of the previous period and thus, it is argued, infringed either the principle of equality (for the second time) or the judgment of 19 October 1977.
In my opinion, it is necessary to avoid falling into the error of linking the actions for damages to the infringement of a hypothetical obligation of the Community, arising out of the judgments of 19 October 1977, to restore retroactively the refunds abolished. The defendants are right to object that such an obligation was not created by those judgments, which merely invested the competent Community institutions with the power and duty to ‘adopt the measures necessary to correct this incompatibility’. There is no doubt that Regulations No 1125 and 1127/78, and the Commission's implementing regulation, are measures intended to correct the unlawful situation established by the Court: it is sufficient to read the second and third recitals in the preamble to Regulation No 1125/78, which refer to the judgments which I have cited several times and declare that ‘the introduction of production refunds for the products in question constitutes a means of conforming with the Court's conclusions’. The possibility that such measures might be inadequate does not mean that they should be considered unlawful, as being contrary to the judgments: it would be more correct to consider them a means — but not necessarily a sufficient means — of complying with the decisions of the Court; a means, therefore, which could have corrected only partially the unlawful situation brought about by the regulations of 1974 and 1975 without giving rise thereby to a new unlawful act.
We also have to find a solution to a procedural problem which has important implications of principle. The judgments of 19 October 1977 were delivered as a result of references for preliminary rulings: therefore it was mainly for the benefit of the national courts which made the references and in the context of the proceedings which had given rise to those references that the Court established an infringement of the principle of equality. But what effect must be accorded to the establishment of that infringement beyond that context, and more particularly in the context of the present cases? The Court is aware of the doubts expressed by jurists on the question whether rulings that Community acts are invalid, given by the Court pursuant to Article 177 of the EEC Treaty, may or may not produce effects erga omnes, and is also aware of the principal arguments which are advanced in support of an affirmative or negative answer: on the one hand, the difficulty of accepting that an act may be valid (in this case, lawful) vis-a-vis some persons and invalid (or unlawful) visà-vis other persons; on the other hand, the difference between an action for annulment and proceedings under Article 177. I do not think it appropriate to dwell here on the theoretical aspects of the problem; permit me only to point out that there is something rather odd in the tendency to ascribe ‘in principle’ relative effects to preliminary rulings then going on to add that ‘in practice’ they have effect erga omnes, as though lawyers were not supposed to adapt their analyses to the general practice, indeed to take account of that practice in making such analyses. For the purpose of the present actions, the factor which I consider worthy of careful consideration is the following: on two occasions already in the recent past this Court has acted on the basis of its own preliminary rulings declaring certain regulations of the Council unlawful in order to give decisions on actions for damages, brought by persons other than the parties to the national proceedings in the context of which the preliminary rulings were given. I refer to the judgment of 25 May 1978 in Joined Cases 83 and 94/76, 4, 15 and 40/77 (known as the milk-powder cases) [1978] ECR 1209 — concerning the liability of the Community institutions for adopting Regulation No 563/73, declared invalid in three decisions of 5 July 1977, in Cases, 114, 116 and Joined Cases 119 and 120/76 — and to the judgment of 28 March 1979 in Case 90/78 Granaria, concerning the liability of the Community for abolishing the refunds for quellmehl, which abolition was, as we know, declared unlawful in the decision of 19 October 1979 in Joined Cases 117/76 and 16/77. In both the judgments cited, no doubt was cast on the extent to which the previous preliminary rulings declaring regulations unlawful could be relied on for the purpose of the actions for damages. Even if that cannot be treated as confirmation of the theory of the effectiveness erga omnes of that type of decision, it may at least be said to have been accepted by the Court that anyone who considers that he has sustained damage as a result of Community acts declared unlawful by way of a ruling under Article 177 is entitled to bring an action under Articles 178 and 215 of the EEC Treaty without having to deal afresh with the question of the unlawfulness of the act, that is to say the source of the Community's liability.
If that is true, as I believe, there is justification for saying that the subject-matter of the present actions is limited to the existence or otherwise of the Community's liability to the applicants on account of the infringement of the principle of equality committed through the abolition of the refunds for quellmehl and gritz in the period which has been repeatedly mentioned; whilst the existence of the unlawful act, consisting precisely in that infringement, must be considered established by the judgments of 19 October 1977.
Consequently it is superfluous to discuss again problems which were dealt with and resolved in the context of the cases which ended in those judgments. I refer here inter alia to the question, reopened in the Council's defence, of the possibility of substituting maize starch for gritz in the brewing of beer: to deny such a possibility cannot serve to upset the finding that the two products have a right to equal treatment, in view of the fact that the Court has recognized that right.
I think it appropriate at this stage to clear up another point, concerning the time at which findings of invalidity or unlawfulness of Community acts under Article 177 of the EEC Treaty take effect. It is frequently said that such rulings take effect ex nunc or, more precisely, that the act declared invalid becomes inapplicable to the legal situation which the dispute concerns. But a declaration of invalidity or unlawfulness with effect ex nunc does not, it is argued, provide any basis for claims for compensation on account of damage occurring previously; thus a reference to the preliminary ruling in which the existence of the unlawful act was established is of no avail to the persons interested in pressing such claims. I find that conclusion unacceptable, and the better view is, I think, that the effect ex nunc of preliminary rulings has always related to the inapplicability of the invalid acts, whilst if it is recognized that those decisions may also be valid for the purpose of actions for damages brought by other persons, the invalidity or unlawfulness must be assumed to have been established ex tunc. In this regard it may be recalled that the Court's decisions of 19 October 1977 in the quellmehl and gritz cases referred to the possibility of making good “any damage sustained by those concerned”; thus those decisions foresaw the possibility of a sequel, which can only be explained by ascribing effect ex tunc to the establishment of the unlawful act.
7.
It is now necessary to ascertain whether the conditions are present on which, according to the case-law of the Court, depends the possibility of the Community's being held liable towards individuals for legislative acts involving of economic policy. In this regard I will say at the outset that I do not share the doubts expressed by the French undertakings about the regulations abolishing refunds for quellmehl and gritz being classed as acts involving choices of economic policy; it seems clear to me that, even if the aim pursued by the Council was to make economies to the detriment of a group of undertakings, it was in any case a question of a choice concerning certain instruments of the Community agricultural policy, which obviously comes within the wider ambit of economic policy.
The conditions governing the non-contractual liability of the Community for acts of the type indicated may be summarized in an expression repeated in numerous judgments of the Court: there must have occurred a “sufficiently serious breach of a superior rule of law for the protection of the individual” (see the judgments, already cited, of 2 December 1971 in Case 5/71, of 13 June 1972 in Joined Cases 9 and 11/71, of 24 October 1973 in Case 43/72, of 2 July 1974 in Case 153/73; also the judgments of 14 May 1975 in Case 74/74 CNTA [1975] ECR 534, of 31 March 1977 in Cases 54 to 60/76, Compagnie Industrielle et Agricole du Comté de Loheac [1977] ECR 645, and of 25 May 1978 in Joined Cases 83 and 94/76, 4, 15 and 40/77, Bayerische HNL and Others [1978] ECR 1209). In delivering my opinion in the last two cases I had occasion to analyse the distinctive characteristics of a “serious breach”; and at the end of that analysis I expressed the opinion that it is necessary to take account of the importance of the rule infringed in the Community legal system, that it is superfluous to examine whether or not the choice made by the Community institutions was “excusable”, and that the extent of the damage is irrelevant. However, taking account of the possibility that the Court might take the view that the gravity of the breach should be related to the extent of the damage, I wanted to define the limits of the damage tolerable by means of a general formula.
The judgment subsequent to that opinion accepted by implication, I think, the test of the importance of the provision infringed, where it stated that “the prohibition on discrimination laid down in the second subparagraph of the third paragraph of Article 40 of the Treaty and infringed by Regulation No 563/76 is in fact designed for the protection of the individual, and that it is impossible to disregard the importance of this prohibition in the system of the Treaty” (paragraph 5 of the decision). At the same time, however, that judgment was influenced by the “restrictive view” taken by the legal systems of the Member States concerning the liability of the public authorities for damage caused to individuals by legislative measures; whilst the conviction which I expressed in my opinion on that the more rigorous solution concerning the liability of the Council should be adopted, since it “has the twofold capacity of legislature and administration without having the democratic mandate and the power to express the sovereignty of the people which may justify exempting the legislature from the general rules on liability”. None the less the judgment added two more criteria to that of the importance of the provision infringed: namely that the institution must have “manifestly and gravely disregarded the limits on the exercise of its powers” and that the damage must exceed the “reasonable limits” within which the individual must accept certain harmful effects on his economic interests as a result of a legislative measure (paragraph 6 of the decision). However, the limits of tolerable damage were not sufficiently clarified; even though, in the most specific part of the decision (paragraph 7) the judgment provides some additional indications, referring to the number of persons affected — as a factor which may lessen the damage sustained by individual undertakings —, to the effects on the production costs, to the comparison between the increase in prices brought about by the regulation and the increase due to other due to other causes and, finally, to the effects on the profit-earning capacity of the undertakings, in relation to the bounds of the economic risks inherent in the activities concerned.
In this case it is beyond dispute that there has been a breach of a superior rule of law for the protection of individuals of fundamental importance in the system of Community law. We know that we are concerned with the prohibition on discrimination, and it might therefore be sufficient to refer to paragraph 5 of the decision of 25 May 1978 in the joined cases Bayerische HNL and Others (even though that judgment concerns the infringement of the second subparagraph of Article 40 (3) of the EEC Treaty, whilst here it is the general principle of non-discrimination which has been infringed). But I think it necessary to emphasize that the situation which led to the present applications is of a more serious nature. In fact, in the milk-powder cases the infringement of the said* Article 40 (3) had been committed by imposing on producers and importers of vegetable feeding-stuffs an obligation to purchase, and so was only indirectly of concern to the users, who were asking for compensation for the damage caused by the increase in costs. As regards those users there was a possibility of indirect discrimination, caused by the increased costs of feeding-stuffs; so it is doubtful whether there was in that case a genuine infringement of individual rights (we have seen that paragraph 5 of the said decision mentioned the prohibition on discrimination as a means of protecting the interests of individuals). On the other hand, in the cases with which we are now concerned there is direct discrimination; there has been an infringement of the applicants' fundamental individual right to equality of treatment in the granting of Community aids, with respect to producers of maize starch, with whom they are in competition. In view of the specific nature of that infringement, it is incorrect to object (as does the Commission) that any damage sustained by a category of persons as a result of a measure taken by the public authorities represents a form of discrimination, and that it is therefore impossible to accept that persons affected by such a measure are entitled to compensation on grounds of discrimination. The truth, is that it is one thing to speak generally of discrimination, and another thing to identify a specific infringement of the rule of non-discrimination; in this case the Court has already found for such an infringement, and it is on the basis of that finding that the applications for compensation have been brought.
The position adopted in the judgment of 25 May 1978 in the milk-powder cases leads me to ask whether in this case the two further conditions governing the liability of the Community for legislative measures according to that judgment are satisfied; and this in spite of the fact that, in my opinion, the considerations examined so far regarding the infringement of the applicants' individual right to equality of treatment are sufficient to demonstrate the existence of a ‘serious breach’ and therefore give rise to the Community's non-contractual liability. That the unlawful act committed by the Council is in the nature of a ‘manifest and grave’ disregard for the provision infringed is, I think, clear both from the nature of that provision (it is useful to repeat that it ‘is one of the fundamental principles of Community law’, as the judgments of 19 October 1977 declared), and from the form of the unlawful act. It was not a question of the adoption of a measure favourable to some and of the failure to adopt an equivalent provision beneficial to other competing undertakings, but rather of an amendment to the previous system, which had brougtht about equality of treatment precisely for the purpose of protecting the competitive capacity of two categories of producers in relation to a third category. It may therefore be said that the Council knew what it was doing, and the Court emphasized that the decision abolishing the refunds was taken in the absence of objective circumstances which could have justified altering the previous system (see paragraph 10 of the decision in Joined Cases 117/76 and 16/77 and paragraph 22 of the decision in Joined Cases 124/76 and 20/77. both of 19 October 1977). Finally, one may add, in confirmation of the manifest character of the infringement, that the Court was able to ascertain its existence mainly because the defendant institutions did not provide technical and economic data or evidence of factors on the basis of which the new policy adopted in 1974 and 1975 towards the producers of quellmehl and gritz might be validly explained. That is equivalent to saying that, in itself, that new line of conduct appeared arbitrary.
It is more difficult to adopt a position at this stage on the question of the extent of the damage sustained by each of the applicants in order to establish whether it remained within the ‘reasonable limits’ which every undertaking exposed to market risks must accept. It is clear that, if one regards serious damage as a condition of the Community's liability for unlawful legislative measures, the question of the existence of such liability may be resolved only after clarification of the nature of the damage to be compensated and the extent thereof. Subject to that reservation, I believe that it is possible to make the following observations for the moment:
(a)
As regards the number of persons affected, the situation this time is appreciably different form the situation in the milk-powder cases. The unlawful conduct of the Council affected two categories, clearly defined and not numerous, of traders, namely producers of gritz intended for the brewing of beer and of quellmehl used for human consumption: in essence, a part of the undertakings comprising the sector, itself limited in size, which is involved in the processing of maize and common wheat.
(b)
The effect of the measures abolishing the refunds on the level of the production costs of the undertakings under consideration appears greater than the effect of the measures concerning the compulsory purchase of milk-powder for mixing with vegetable feeding-stuffs. In this regard I note that, according to the evidence of the Council in Case 238/78, the abolition of the refunds for quellmehl benefited starch, in relation to quellmehl, at the rate of between 6.3 an 8.6 %. In Case 261/78 the applicant (Interquell Stärke-Chemie) openly states that as a result of the abolition of the refunds production costs increased by 20 %.
(c)
The comparison with price increases due to other causes which, as I have recalled, was among the factors emphasized in the milk-powder judgments, is irrelevant here, since the individuals affected are producers and not purchasers, as occurred in those cases.
(d)
Different answers could be given to the question whether the effect of the abolition of the refunds on the profit-earning capacity of the undertakings producing gritz and quellmehl did or did not exceed the bounds of the economic risks inherent in the activities of those undertakings. On the one hand, it could be said that a public subsidy to a private undertaking is not usually permanently guaranteed; thus an undertaking should be able to face the risk of losing it. On the other hand, however, it might be pointed out that in an activity objectively capable of affecting the competitiveness of another activity (quite apart from any system of refunds, the production of gritz and quellmehl competes with the production of maize starch), the ordinary commercial risks do not include the possibility of the conditions of competition suddenly being upset and artificially distorted as a result of a decision by the public authority to maintain its aid to the competing undertakings and to abolish it for the activity concerned. In my opinion, this observation has greater weight than the previous one; however I consider that the test of assessing the damage in relation to the bounds of the risks inherent in business activity inevitably leads to uncertain results, in view of the fact that the extent of the risks which ‘normally’ accompany a particular economic activity is uncertain and arguable.
In accordance with the reasoning developed so far it may be said that, applying to these cases the criteria laid down in paragraph 7 of the decision of 25 May 1978 in the joined cases Bayerische HNL and Others, there do not appear to he grounds for excluding the Community's liability. Of course that leaves open the question of the extent of the damage, which it is also necessary to ascertain in order to decide whether it was ‘tolerable’.
8.
Before considering the claims for damages brought by the applicants, it is appropriate to ascertain what conditions on the question of compensation for damage are expressly or by implication contained in the judgments of 19 October 1977, in view of the fact the parties often referred to those judgments as a basis for argument in support of their respective points of view.
With regard to the judgments in question, one of the first observations which must be made is that by declaring unlawful Article 11 of Regulation No 120/67, as amended by Article 5 of Regulation No 1125/74 (in respect of quellmehl) and Article 3 of Regulation No 663/75 (in respect of gritz), they raised the problem of ‘removing’ such unlawfulness — that was the language used by the Court — not only as regards the future, but also as regards the past. Sufficient proof of that is the fact that both the judgments expressly envisage the restoration of equality of treatment between the two products and the payment of compensation for any damage sustained by the interested parties; the restoration could take place ex nunc or ex tunc; the payment of compensation was intended to ensure that the past effects of the unlawfulness were completely corrected. However, there is another aspect to be considered. We know that the references for preliminary rulings which led to the two judgments concerned the validity of the amendments to Regulation No 120/67, whereby the refunds for quellmehl and gritz were abolished, and we know that the Court did not rule that they were invalid mainly because of a legal technicality: since the amendments had taken the form of replacing the old provision by a new one, which no longer mentioned quellmehl in the one case and gritz in the other (‘the provision is unlawful because of something for which it makes no provision rather than on account of any part of its wording’, to quote from the two judgments). If that technical obstacle had not been present and the abolition of the refunds had taken place by means of express repealing provisions, the Court would certainly have declared them invalid, regardless of the fact that the fixing of the amount of the refunds payable to the producers of quellmehl and gritz required the adoption of an appropriate measure by the Council (that was the subject of the second question referred bv the Finanzgericht Hamburg in Joined Cases 117/76 and 16/77). Thus the way would have been opened for recognizing before the national courts the right of the undertakings concerned to obtain the production refunds as from the date of the respective applications. The different type of reply which the Court gave to the national courts on account of the technical obstacle which I have mentioned and the consequences which arose from that do not change the nature of the problem, which is still that of the unequal treatment suffered by the producers of gritz and quellmehl in relation to the producers of starch, the legal appraisal of that inequality and the means of removing it ab initio.
In the second place, it is necessary to examine thoroughly the implications of the options which the judgments of 19 October 1977 left to the Community institutions, recognizing ‘the existence of several courses of action which would enable the two products in question once again to be treated equally and to make good any damage sustained by those concerned’, and declaring that ‘it is for the institutions responsible for the common agricultural policy to assess the economic and political considerations on which this choice of action depends’. Obviously, as regards the future three possible measures might be imagined: the restoration of the refunds for gritz and quellmehl, leaving those for starch unchanged, or the abolition of the refunds for all the products in question, or finally the fixing of a new common level (the second and the third alternatives could also have been accompanied by supporting measures of another type). As regards the past on the other hand, in view of the fact that it would not have been possible to require repayment of the refunds paid to producers of starch without interfering with established rights, the possibilities were in my opinion reduced to two: the restoration of the refunds for gritz and quellmehl by a provision having general effect ex tunc or the payment of compensation to each of the undertakings concerned on application (perhaps also a general provision for flat-rate compensation with an undertaking to consider individual cases of further damage could have helped to solve the problem). In this regard I will observe that the suggestion made by the Council, whereby the refunds for starch could have been abolished retroactively, thus achieving equality of treatment of the three categories, but without attempting to recover the refunds paid to the producers of starch, amounts to a theoretical solution and is not convincing: in fact in such a situation the producers of gritz and quellmehl could still have claimed compensation for the damage caused by an infringement of their right to genuine, not purely theoretical, equality of treatment in relation to the producers of starch.
The way in which the Council exercised its discretion leads to further reflection. We have seen that Regulations Nos 1125 and 1127/78 restored the refunds for quellmehl and gritz, at the same level as those paid to the producers of starch; that is to say, they adopted the first of the three possible solutions mentioned above (at least until the end of the 1978/79 marketing year). But that choice was made not only for the future: the regulations, which entered into force on 2 June 1978, granted the refunds as from 19 October 1977, at the request of the interested party (see Article 6 of Regulation No 1127/78). Thus the restoration of the refunds for quellmehl and gritz also had a compensatory function, as regards the period 19 October 1977 to 1 June 1978: in fact, since that period had already elapsed at the date on which the said regulations entered into force, it was no longer possible to consider that the refunds were performing their normal function of supporting the marketing of particular agricultural products. That fact is not, in my opinion, belied by the wording of the penultimate recital in the preamble to Regulation No 1125/78, which states that the retrospective nature of the measure is due to the Council's having been required to comply with the procedures laid down by the Treaty. In fact, the anomalous use of refunds as an instrument, inherent in the retrospective nature of Regulations No 1125 and 1127/78, was pointed out by the Commission, which was not in favour of giving them retroactive effect (see the Commission's defence of 4 December 1978 in Case 238/78). In any case, as a result of the position adopted, the period between the abolition of the refunds for the two products in question and the entry into force of the provisions which restored them has been divided into two parts: from 19 October 1977 to 1 June 1978 the refunds were granted retroactively; from August 1974 (in the case of quellmehl) and from August 1975 (in the case of gritz) to 19 October 1977 the question of compensation remains open. The best way of removing the unlawfulness, as required by the judgments of 19 October 1977, would have been to adopt uniform measures for the two phases of the period indicated, as for the period before and after the adoption of Regulations Nos 1125 and 1127/78; but it is still possible to achieve uniformity in substance.
There is finally another aspect of those decisions, to which the defendant institutions attached great importance: the fact that they mention making good any damage sustained by those concerned. The defendants' argument may be summarized as follows: the damage for which the applicants are now requesting compensation is the loss of the income from the refunds, which, being inherent in the abolition itself, is not in the nature of a potential loss, whilst the Court mentioned ‘any damage sustained’, thus by implication excluding the recovery of damages for the loss of the refunds. In my opinion, it is going too far to presume that, by using the aforesaid expression, the Court wished to take up a position on the question of the damage for which compensation is payable in the context of preliminary rulings, when the subject of the nature of the damage has not yet been examined in depth. It seems more reasonable to suppose that the terms used were intended not to anticipate or prejudge an issue which could only be properly appraised by means of the appropriate procedure. Apart from that, it must be borne in mind that the existence and extent of the damage were, at the date of the judgments, variable factors depending on the course of action which the Council chose in order to restore equality of treatment between starch on the one hand and gritz and quellmehl on the other; if that restoration had taken the form (as was quite possible) of reintroducing retroactively the refunds for the two products unfairly treated, it would have remained necessary to pay compensation only for the ‘additional’ damage. In reading the sentence which refers to the ‘existence of several courses of action which would enable the two products in question once again to be treated equally and to make good any damage sustained by those concerned’ it must not be forgotten that the complete attainment of the first objective might have absorbed the second one, or reduced it to marginal importance. It should also be remembered, on a general level, that in identifying the damage for which compensation is payable other factors enter into consideration, such as the possibility that the Community might not be required to pay compensation because the level of the damage caused by a legislative measure of the Community is ‘tolerable’ or ‘reasonable’, or such as the hypothetical existence of profits which might have made up for the loss sustained (this point will be dealt with later).
In sum, an examination of the judgments of 19 October 1977 permits the following observations to be made: (a) the removal of the unlawful act committed by the Council required measures affecting the period before then; (b) the institutions' margin of discretion in this matter was limited to a choice between a general measure restoring the refunds in favour of the producers of quellmehl and gritz, having retroactive effect, and a series of individual measures providing for compensation to be paid to those who applied for it; (c) the reference to making good any damage sustained by those concerned does not provide a sufficient basis for excluding the possibility of compensation being payable for the damage lying in the loss of the refunds for the period prior to 19 October 1977.
9.
It is well known that the legal concept of ‘damage’ covers both a material loss stricto senso, that is to say, a reduction in a person's assets, and also the loss of an increase in those assets which would have occurred if the harmful act had not taken place (these two alternatives are known respectively as damnum emergens and lucrum cessans). In the case of damage resulting from an unlawful act not connected with a contract, the infringement of a rule of law causes injury to the interest which is protected by the provision — and which in cases such as this becomes a personal right of the individual — as well as adversely affecting the assets of the person. The object of compensation is to restore the assets of the victim to the condition in which they would have been apart from the unlawful act, or at least to the condition closest to that which would have been produced if the unlawful act had not taken place: the hypothetical nature of that restoration often entails a certain degree of approximation. I think it appropriate to emphasize that these general remarks are not limited to the field of private law, but apply also to the liability of public authorities, and more especially to the non-contractual liability of the Community. Thus, for example, a question of lucrum cessans was approached by the Court in the judgment, already cited, of 14 July 1967 in the Kampffmeyer case; whilst the question of assessing the damage for which compensation is payable was the subject of some interesting remarks in the judgment of 9 December 1965 in Joined Cases 29, 31, 36, 39 to 47, 50 and 51/63 S.A. des Laminoirs, Hauls Fourneaux, Forges, Fonderies ct Usines de la Providence and Others v High Authority [1965] ECR 911: there it was said inter alia that in assessing the damage the applicants used the only method possible, consisting in imagining the position which would have arisen (concerning the purchase of ferrous scrap) if the High Authority had not made the unlawful promises (relating to transport parity) which represented the harmful act.
In returning now to the subject of the present applications, it is necessary to bear in mind that, by infringing the principle of equality, the Council has adversely affected the interest — the right even — entitling the applicant companies to the same treatment as the producers of starch in the granting of production refunds, and thereby the right to the increase in their respective assets which would have taken place if the refunds for quellmehl and gritz had not been abolished. It is clear that this second aspect of the damage would not have any legal importance independent of the first aspect: in other words, the material damage must be made good because it occurred as a result of the infringement of an absolute right. And even if the damage is identical to the lost income, it enters into consideration for legal purposes because at the same time it entailed an unfair economic disadvantage, a handicap in the applicants' competition with the producers of starch, which continued to enjoy Community aid. In short: the disparity of treatment had economic and financial repercussions; as it constituted an illegal act, compensation will provide a financial remedy and thus restore the economic balance ex post facto.
In order to compensate the applicants in these cases in accordance with the concept of damages which I referred to above, it is necessary to seek to restore the financial situation in which they would have been placed, between 1 August 1974 (as regards quellmehl) or 1 August 1975 (as regards gritz) and 19 October 1977, if the Council had not unlawfully abolished the production refunds which they were receiving. Naturally this attempt to reconstitute a state of affairs which may only be imagined has its limitations: the judgment of 9 December 1965 in Joined Cases 29, 31, 36, 39 to 47, 50 and 51/63 rightly pointed out that ‘when it is necessary to consider a situation as it would have been if there had been no wrongful act or omission, the Court must, while insisting that all available evidence be produced, accept realistic approximations …’. In the present case it is not possible to establish at this point what use the applicants would have made of the sums which would have been payable to them by way of refunds; perhaps they would have used them to renew their plant, so improving the productivity of their businesses, or to fix their selling prices at more competitive levels, or to acquire greater quantities of raw materials. Depending on the success or failure of such ventures, the assets of those undertakings might have undergone unforeseeable fluctuations which it is no longer possible to calculate. However, one thing is clear: the financial resources of the producers of gritz and quellmehl were smaller than those at the disposal of the producers of starch, whose assets were increased by the production refunds for the abovementioned period.
If therefore it is true, as I believe, that the damage suffered by the applicants must be assessed in relation to the right infringed, namely the right to equality of treatment with respect to the producers of starch, the correct solution seems to be to measure the damage by reference to the inequality. In financial terms the inequality lies in the amount of the refunds not having been paid to the producers of gritz and quellmehl, whilst they were in fact paid to the producers of starch. In my opinion therefore the principal claims of the applicants, seeking to obtain the aforesaid amount by way of damages, deserve to succeed.
Such a solution seems to me to be in accordance with the general principles concerning the consequences of an unlawful act or omission, not connected with a contract, in the legal systems of the Member States. Indeed, if to make good damage means to pay a sum of money equivalent to the damage suffered — and thus to restore, as far as possible, the position impaired by the unlawful act or omission — the only way of applying that test to the present case is to pay damages equivalent to the refunds abolished. I would point out further that the same criterion was applied by the Council when it gave retroactive effect as from 19 October 1977 to Regulations Nos 1125 and 1127/78: I have already stated that the payment of refunds for the period prior to the date on which those regulations entered into force could not be justified except by way of compensation, and it only remains for me to emphasize that, by taking that decision, the Council assessed damages at an amount equal to the refunds in respect of the months between 19 October 1977 and 1 June 1978.
With reference to the conditions under which compensation is payable for damage, it may easily be ascertained that in the present case it is a question of (a) direct damage, that is to say damage directly caused by the wrongful act or omission. The causal relationship is obvious: the abolition of the refunds for quellmehl and gritz was the direct cause of the inequality as against the producers of starch and of the loss of income from the refunds; (b) certain damage: in fact there cannot be any dispute that the refunds for quellmehl were not paid from 1 August 1974 and 1 August 1975 respectively to 19 October 1977. The problem of the burden of the proof does not arise in view of the fact that the matter is beyond argument; (c) specific damage: the victims of the damage are the producers of quellmehl and gritz who were entitled to Community aid and who continued to manufacture those products during the above-mentioned period (or part thereof); (d) serious damage: as is clear from the matters already considered with regard to the effect on production costs of the measures abolishing the refunds, and as is confirmed by the very objections of the Council concerning the size of the payments which would have to be made in order to provide compensation equivalent to the refunds abolished. On account of this last aspect of the damage it may be said that in this case the general conditions governing the Community's liability for legislative measures are satisfied, even if the restrictive criteria laid down in the Court's recent case-law are applied.
10.
Let us now consider what reply may be given to the arguments with which the defendant institutions have contested the applicant undertakings' claims.
It seems to me that a certain number of those arguments are based on a different conception of the damage from that which I have supported above, and that this is in fact one of the central points of the dispute. In fact, the Council and the Commission dwell at length on what they consider the prosperous state of most of the producers of gritz (especially the German, Belgian and Netherlands ones) and of the (German) producers of quellmehl during the period in which the Community aid was not paid: production and sales rose, it is argued, instead of decreasing, and profit margins remained satisfactory; thus financial losses did not occur. But we know that only the French producers of gritz, and even then only some of them, are asking for compensation for damnum emergens as well as for lucrum cessans; apart from that, the damage for which all the applicants are asking to be compensated coincides with the loss of income from the refunds, and the lost income constitutes damage in itself — as I have tried to show above — without its being necessary to prove material losses of a different nature. Besides, the alleged ability of the gritz and quellmehl producers to withstand competition without any Community support might justify the abolition (or reduction) of the aids for the future, and possibly also a difference of treatment in relation to starch, if the institutions were in possession of sufficient data to prove that such a difference did not infringe the principle of non-discrimination; but as regards the past, the disparity in treatment in relation to starch is an established fact, and the greater or lesser prosperity of the gritz and quellmehl industry cannot remove that disparity or its unlawful nature, which are the origin of the Community's obligation to make good the damage.
The conception of damage supported by the Council and the Commission becomes apparent when they deny that the loss of income in the form of Community aids is in itself damage for which compensation is payable: according to them compensation is payable for such damage only in the context of private law. I have started from the opposite point of view, because I believe that in this regard public law derived the notion of damage from private law without limiting it. Besides, I have cited the predecent which exists in the case-law of this Court, namely the Kampffmeyer case (judgment of 14 July 1967 in Joined Cases 5, 7 and 13 to 24/66): that case concerned damage suffered by importers as a result of an unlawful decision of the Commission (which had confirmed a German protective measure suspending the issue of import licences), and some of the applicants had included in the damage the lost profit on quantities of goods purchased and not imported. The Court did not dispute that compensation was payable for that sort of damage, but it considered that ‘the injury resulting from loss of profit for which the Community must be regarded as being liable’ should not exceed 10 % of the sum which the applicants would have paid by way of levy, because the damage was based on facts of an essentially speculative nature. Similar claims were rejected because the import transactions had not even been commenced; as they were merely intended transactions, they lacked ‘any substantial character’. As may be seen, the Court had every opportunity to adopt a position opposed in principle to the recovery of compensation for lost profit; but it did not do so; instead it dealt with the assessment of the extent of the damage, and expressly recognized that such damage was recoverable.
The defendant institutions, for their part, referred repeatedly to the judgment of 15 June 1976 in Case 74/74 CNTA [1976] ECR 797. The facts of the case were as follows: a Commission regulation had abolished with immediate effect the monetary compensatory amounts applicable to colza and rape seeds without adopting transitional measures; bv interlocutory judgment of 14 May 1975 ([1975] ECR 533), the Court had declared the Commission liable for an infringement of the principle of legitimate expectation; as compensation the applicants claimed a sum corresponding to the compensatory amounts to which they would have been entitled. That claim was rejected, but for a particular reason: namely that it was clear from the interlocutory judgment that the loss to be compensated was that related to the fact that the applicant had been re-exposed to the exchange risk against which it was entitled to consider itself covered by the system of the compensatory amounts (see paragraphs 45 and 46 of the interlocutory judgment, and paragraphs 6 and 7 of the final judgment). In fact the Court had stated that the maintenance of the compensatory amounts could not be considered to be guaranteed to the undertakings and that therefore the protection afforded to the applicant by the principle of legitimate expectation did no more than compensate it for the losses which the unforeseen abolition of the said amounts might cause it. In substance, damages were rightly calculated in relation to the nature and the extent of the unlawful act: the principle of legitimate expectation had been infringed not because the compensatory amounts had been abolished, but because their abolition, lawful in itself, had occurred in such a way as to expose the applicant to an exchange risk in the commercial transactions which it had already undertaken to carry out. The difference, with regard to the situation in the present cases, clearly concerns a decisive point: in these cases, the abolition of the production refunds for quellmehl and gritz constitutes the unlawful act itself, as it involves an infringement of the principle of non-discrimination; and in accordance with the logic of the two CNTA judgments, damages must be calculated in relation to the nature and the extent of the unlawful act, which in this case lies in the inequality created between producers of gritz and quellmehl on the one hand, and producers of starch on the other hand, on account of the refunds denied to the former and granted to the latter.
Therefore I do not think that valid arguments against the recovery of the lost profit may be drawn from the CNTA case. The defendant institutions attempted to argue that the loss of income consisting of financial aid granted out of public funds is outside the scope of the concept of lost profit; that concept, it was argued, covers only commercial profit or gain yielded by the activity pursued by the undertaking, which it had legitimate grounds to expect and which did not accrue as a result of the unlawful act. Linguistically, such a restrictive definition of lost profit may appear correct; but that does not alter the fact that every type of material gain, and financial gain in particular, which the person concerned would have enjoyed if the unlawful act had not occurred, comes within the general concept of lost profit. And from the point of view of equity, there are better reasons for compensating someone who has lost income to which he would have been entitled (as in this case, if the institutions had observed the principle of equality) rather than someone who has lost the benefit or profit normally associated with his activity. One could even discuss — although the point is only of theoretical interest — whether the failure to pay a sum which in principle ought to have been granted should be described as damnum emergens or lucrum cessans or whether it is of a ‘hybrid’ nature. Besides, emphasizing the fact that the lost income in this case is in the nature of a public subsidy could give rise to a misunderstanding: without doubt the abolition of public subsidies granted without any undertaking as to their duration, by the same authority which granted them and within the limits of that authority's powers, is normally a lawful act, which does not give rise to a claim for damages of any son; but it must not be forgotten that in the cases under consideration here the abolition was a discriminatory act, unlawful in so far as it caused inequality, and that the right to compensation is due to the infringement of the right to equality of treatment.
Two further objections were raised, and repeated several times, by the defendant institutions against the upholding of the applicants' principal claim on its merits: in the first place, the award of an amount of damages equivalent to the unpaid refunds would in reality be a retroactive measure for the repayment of the refunds, which measure the judgments of 19 October 1977 had in no way compelled the Community institutions to adopt; secondly, a payment ex post facto would distort the proper function of the refunds, which is that of a stimulus and an aid to the sale of particular products, but which may not be understood as the provision of a commercial benefit.
The examination of these two arguments forces me to return to matters already discussed; I shall seek to do it briefly. It is true that the judgments of 19 October 1977 did not impose an obligation on the Community institutions to pay the refunds to the producers of quellmehl and gritz retroactively; however, they did require those institutions to eliminate the incompatibility with the principle of equality shown to have existed as from the time when the refunds were abolished, thus eliminating the unlawful act. In view of the fact that the producers of starch had received the Community aid without interruption, equality in relation to them could be restored, as regards the past, in two ways only: by restoring the refunds retroactively or by paying compensation for the damage. The Council has already given a limited retroactive effect to the restoration of the refunds, as I pointed out above: it remains for it to make good the damage caused to the applicants during the period prior to 19 October 1977. The fact that the minimum level of compensation corresponds to the amount of the unpaid refunds does not preclude the cause and the nature of the payment from being different; that difference lies above all in the fact that the retroactive restoration of the refunds would have required a regulation, whereas it is now a question of specific measures of compensation, and in the possibility that some undertakings may be entitled to higher sums because they have sustained further damage. In any case, when the unlawful an giving rise to non-contractual liability consists of the non-payment of sums due, it is perfectly normal for the compensation to coincide with the payment of those sums.
These considerations facilitate the reply to the second of the above-mentioned objections. If it is true that the solution to be adopted now does not lie in the retroactive payment of refunds, it is pointless to object that such a payment is contrary to the proper function of the refunds. Besides, it is in the light of that criterion that I have had occasion to emphasize the compensatory nature of the retroactive restoration of the refunds provided for bv the Council in Regulations Nos 1125 and 1127 of 1978 in respect of the period from 19 October 1977 to 1 June 1978.
11.
There is another important point in the institutions' line of defence, with which I feel obliged to deal at length. I refer to the argument that it is necessary to establish whether the producers of gritz and quellmehl passed on — or had the opportunity to pass on — to their customers, by means of increased selling prices, the losses arising from the non-payment of the refunds: in that event, it is argued, compensation would no longer be payable (or at least it would have to be reduced to the extent to which the loss was made good by the additional income due to those increases).
First of all I would point out that it is one thing to argue — as the Council does in the actions brought by the French producers of gritz — that the loss of income was passed on in the selling prices, and another thing merely to assert that it would have been possible to pass the loss on in such a way (that is generally the Council's position on the actions brought by the German, Belgian and the Netherlands producers). In fact two different arguments are involved and the difference between them will have an influence on the search for the principles capable of justifying those arguments in the context of the rules on the non-contractual liability of the Community. If the loss was actually passed on, that could cancel out or reduce the damage recoverable, in the event of application being made of the principle that against the damage must be set off any benefit flowing from the same unlawful act (compensatio lucri'cum damno). But in this case the benefit which is presumed to be connected with the increase in prices could never be said to have been caused by the abolition of the production refunds: it is in truth the result of an independent decision of the producers. In other words: the balancing of the damage against the gain presupposes that both are direct and automatic consequences of the unlawful act, whereas in this case the abolition of the Community aid did not directly give rise to any benefit for the undertakings sustaining damage.
The Council did not deal with this question of principle, but referred to the joined cases Bayerische HNL and Others, which also involved the problem arising when the effect of the damage is passed on to the customers. It is true that in my opinion of 1 March 1978 in those cases, I considered it important for the purpose of fixing the compensation to establish whether the higher cost of the feeding-stuffs had been passed on in the selling prices charged by the breeders (in the prices of chickens and eggs for example). However, the situation was completely different: as it was a question of damage caused by the purchase of milk powder which the Community had required the importers and producers of feeding-stuffs to buy, the indirect damage for which the breeders, as purchasers of the feeding-stuffs, were claiming compensation on account of the higher cost of those feeding-stuffs would really have been sustained by their customers, if the selling prices of the breeders' products had been increased by an amount corresponding to the increase in the prices of the feeding-stuffs. In any case, the question was not dealt with in depth, and did not affect the decision of the Court.
As regards the argument that the recovery of damages is precluded by the mere possibility of passing on the effect of the damage to the customers, one might conceivably consider the question in the light of another principle: namely the principle whereby compensation is not recoverable for damage which the victim could have avoided by means of due diligence. Nevertheless it must not be forgotten that in this case the damage lay in a loss of income, and although it is true that by increasing their earnings from other sources the victims could to some extent compensate for the adverse effect of that damage on their assets, they were certainly not in a position to prevent the loss of the income by their diligence. Besides, there is reason to doubt whether the ‘ordinary diligence’ of a producer includes passing on to his customers the damage resulting from the abolition of public aid.
It must be borne in mind that undertakings act according to the logic inspired by the profit motive and on the basis of the market conditions. That means that, where the market permits it, they tend so to fix prices as to ensure higher profits; and conversely, where the market does not permit of price increases, they must refrain from making such increases even though they would feel inclined to do so, lest they should suffer a drop in their income. Therefore it is incorrect to assume that a diligent producer should increase his selling prices when a public financial aid ceases to be paid to him: in many cases such a decision might constitute a grave commercial error.
The complexity of the factors which determine the fluctuations in prices also makes it difficult to distinguish, in dealing with price increases, which factors may properly be regarded as the effects of an occurrence having an adverse financial effect on the under taking. In order to associate the increase with the damage which it would (one supposes) help to reduce, it would be necessary to have evidence proving that the increase could not equally have occurred, for purely speculative ends, in the absence of any damage flowing from the unlawful act. It would also be necessary to show that the increase was not due to higher costs (for example the cost of labour or raw materials); otherwise the undertakings' profit would not be increased and the damage would not be cancelled out.
This question clearly raises problems of proof. I would point out incidentally that the above-mentioned arguments are different from the objections discussed previously, in that they do not represent a categorical denial of the right to damages equivalent to the lost income from the refunds, but presuppose that the applicants are entitled to such damages, and counter their claim with a factor (the increase, or the possibility of an increase, in the selling prices) capable of reducing the extent of the damage recoverable or even eliminating it completely. From a procedural point of view, to counter the claim for damages with one of the arguments in question involves raising a special plea; therefore the burden of proof falls on the party raising that plea. In the applications brought by the French producers of gritz the Council has indicated a series of figures concerning the price increases, but it has not proved that those increases were determined by the abolition of the refunds, or that they brought any advantage to the applicants (which, for their part, have supplied information to counter both points). It must also be borne in mind that in those cases the Council is challenging the greater damage complained of by the applicants, and it is not clear to what extent its arguments are in support of that challenge or of the thesis whereby the effect of the damage was passed on in the selling prices. More difficult still is the task of showing that there was in the other cases a possibility of passing on to the customers the effect of the damage caused by the cessation of the refunds: the argument that has taken place between the parties on this subject has not in my opinion allowed any firm conclusion to be reached.
In sum, therefore: there is no valid justification in principle for considering compensation precluded, or reduced, on the ground that the damage lying in the producers' loss of receipts was, or could have been, passed on in the selling prices; in each of the cases with which we are dealing the party which would have had to prove such circumstances has not adduced convincing evidence.
The considerations examined, and the conclusions to which they have led, also serve to underline that any increase in the profits of the undertakings adversely affected by the abolition of the refunds may not be relied on legally as a ground for reducing or cancelling out the damage caused by that abolition. Higher profits may be derived from the ability of those concerned to organize production and sales more rationally, possibly reducing costs, so as to succeed in maintaining profit margins or even increasing them, in spite of the loss of the Community aid unlawfully abolished. If it were to be accepted (apart from any legal rule) that a balance may be drawn between such losses and the increased profits of the undertakings, the result would be to afford the author of the unlawful act a position of advantage by virtue of the initiative and ability of the victim. I repeat that the prosperous conditions of some producers of gritz and quellmehl, in spite of the temporary abolition of the Community aid, might perhaps go to show that that aid was superfluous; but the point does not arise here, since the Court has decided that the disparity in treatment with regard to the producers of starch must be corrected, and the Council has restored the system of refunds for gritz and quellmehl as regards the future. Therefore to resolve the question of damages claimed in these cases, we must leave out of consideration any achievements due to the management of the applicant undertakings during the period in which Community financial aid was not available.
12.
At the beginning I mentioned that some of the French gritz producers are claiming, in addition to compensation for the inequality with the starch producers on account of the non-payment of the production refunds, compensation for ‘the other items of damage arising from the failure to restore that refund’. The applicants involved are Dumortier and Maïseries du Nord (Cases 64 and 113/76), which claim to have been obliged to reduce their production and sell at unprofitable prices, and in spite of that to have lost some of their customers; Moulins & Huileries de Pont-à-Mousson (Case 167/78), which says that it was forced to dismiss numerous workers, bearing the cost of the resulting compensation, and to cease production of gritz; Costimex (Case 27/79), which complains that it had to close its factory at Valenciennes; Maiseries Alsaciennes (Case 45/79), which claims that its financial difficulties compelled it to dismiss its whole work force, commence insolvency proceedings and cease trading. The Council disputed these claims of greater damage, painting a generally rosy picture of the economic situation of the French gritz producers and suggesting, in relation to many of the difficulties complained of, causes other than the abolition of the refunds during the period in question (such as bad management, obsolete plant or competition from foreign producers in a favourable geographic position).
The fact that the claims for compensation in question are added to the claims for damages equivalent to the unpaid refunds raises a question of compatibility between the former and the latter. As I have already explained, damages of an amount corresponding to the unpaid refunds are designed to remedy the inequality unlawfully occasioned between producers of starch on the one hand and producers of gritz and quellmehl on the other, thus removing the competitive handicap to which the latter have been subjected. Compensation for the ‘other items of damage’ claimed by the aforesaid applicants would serve to correct certain aspects of that inequality (for example, the customers' switch to the starch producers, complained of by Dumortier and Maiseries du Nord, and obviously caused by the advantageous position of the competing product), or certain consequences thereof (reduced liquidity, the need to cut down the work force, cessation of trading, etc.). If that is true, it must be considered that the compensation for such ‘items of damage’ may not overlap with the compensation for non-payment of the refunds: otherwise compensation would be paid twice for the same damage. In fact, the object of the latter type of compensation is to cover all the losses of each undertaking connected with the reduction in financial assets, or at any rate resulting from the difference in treatment as against the starch producers, of which the aggregate value does not exceed the value of the unpaid refunds. Only if an undertaking has suffered losses in excess of that sum, may there be justification, in my opinion, for a supplementary claim for compensation, seeking to obtain the equivalent of the difference between the material loss occasioned by the abolition of the refunds and the damages in respect of the refunds not received.
Against that opinion it would be of no avail to point out that compensation for damnum emergens may normally overlap with compensation for lucrum cessans. In fact, such overlapping is permissible in respect of lucrum cessans in the sense of lost profit from commercial (or professional) activities; but in this case we know that the concept of lucrum cessans has been understood and applied in its wider sense of income not received; and that the income not received was in respect of Community financial aid designed to support the manufacturers of gritz and quellmehl strengthening their competitive position. Therefore the payment by the Community institutions of compensation equivalent to the aids abolished for a certain period would constitute a form of reparation capable also of making good the damage arising from the weakening of the competitive position of the undertakings concerned. It is possible that there have been greater losses to make good; but I do not think it acceptable to add together one amount equivalent to the refunds and another amount designed to make good all the ‘items of damage’ to which the aforesaid French producers of gritz refer.
In view of that, I believe that it is beyond dispute that the burden of proving further damage was on the five undertakings concerned, and that it was also incumbent on them to prove the causal connexion between the abolition of the refunds and such further damage. In fact, the applicants have adduced evidence of a number of factors; for its part the Council has disputed a number of points and supplied further data. In my opinion, however, the discussion remained at too general a level: there was argument about the circumstances which may explain the particular difficulties of the gritz producers situated in the north of France, where important starch factories are situated, and in Alsace, where the German competition is felt more keenly; about the traditional and, according to the Council, unchanged tendency of the French brewers to use gritz, contrary to the claim that starch was used more extensively during the period in question; about the significance of the increases in the price of gritz made from 1975 onwards by the applicant undertakings (in an attempt to establish whether, or to what extent, such increases were merely a consequence of the higher cost of the raw material); about the general trend of sales of gritz in France. In that way confusion arose between the subject of the general state of the gritz producers after the abolition of the refunds, the passing on of the lost income in the selling prices, and the specific question of the losses sustained by the five undertakings who seek to be compensated for further damage. What those undertakings should have done — which in my opinion they have not succeeded in doing — was to show a precise link between the evidence adduced and the figures included in their conclusions with reference to compensation for the other items of damage, and overcome the objections of the Council regarding the origins of their difficulties. In short: there has not been sufficient proof of causality, and the quantification of the damage does not appear convincing.
Even as regards some facts which are undisputed, and which might indeed, because of their importance, constitute a basis for a wider claim for compensation, the fundamental question of the causal connexion has been dealt with vaguely. I refer in particular to the cessation of production by Moulins & Huileries de Pont-a-Mousson (Case 167/78) in May 1978, to the closure of Costimex's factory at Valenciennes (Case 27/79), to the commencement of insolvency proceedings in September 1976 by Maïseries Alsaciennes (Case 45/79): to what extent were those events the results of the abolition of the refunds? The applicants' statements were not corroborated by the evidence of experts, and the Council had a strong point in its objection that the first of the abovementioned companies had obsolete plant, not modernized in time, that the closure of the factory at Valenciennes took place in the ordinary course of business reorganization (as is proved by the fact that another factory belonging to the same company more than doubled its production during the same period), and finally that the commencement of insolvency proceedings by Maïseries Alsaciennes was due to a mistaken investment policy, pursued by that company, and to the financial difficulties resulting from that policy. Of course the companies concerned replied to those arguments, but in my opinion the most that can be said is that the confrontation between the two opposing points of view did not produce clear results.
In the circumstances the Court could quite simply find that the existence of further damage, caused by the abolition of the refunds, has not been proved by the undertakings concerned. However, I think that it is fair to take account of the objective difficulty of proof and of the fact that the applicants themselves asked the Court (at least in Cases 64 and 113/76, 27 and 45/79) to order a survey to be commissioned in order to assess the damage. I would add that, if the applicants concerned are given an opportunity to complete the documents produced and to give more details about their claims before the survey is carried out, they will also have the advantage of knowing, in the meantime, within what limits the Court considers the claims for damages for lost income from the refunds compatible with the claims for compensation for further damage. Therefore in my opinion, the Court's judgment should settle this question in principle, and then give the applicant undertakings the opportunity which I have mentioned — assuming that an agreemen on the total amount of damages: lot reached directly between them and the Council within a period to be laid down — for the purpose of a survey which would clarify the origin of the items of damage complained of (if the existence thereof is established) and make a precise monetary assessment of such damage.
13.
The actions brought by the quellmehl producers raise a particular problem, concerning the limits of the refunds to which they would have been entitled if the Council had observed the principle of equality of treatment in relation to the starch producers; refunds which, as the Court knows, constitute the point of reference for calculating the amount of compensation claimed. In fact, Ireks-Arkady, Interquell Starke-Chemie and Diamalt (Cases 238/78, 261/78 and 262/78) have assessed damages by reference to the quantities of quellmehl intended for human consumption; whilst Interquell also seeks compensation in respect of the quellmehl used for animal feed. For a clearer understanding of the nature of the problem, it should be recalled that, on the one hand, the operative part of the judgment of 19 October 1977 in Joined Cases 117/76 and 16/77 declared contrary to the principle of equality the disparity in the treatment of quellmehl and pre-gelatinized starch without distinguishing between the different producers of quellmehl, and that, on the other hand, Council Regulations Nos 1125 and 1127/78 of 22 May 1978 reintroduced the production refunds for maize and common wheat used in the manufacture of starch and quellmehl intended for use in the bakery industry.
In this connexion, I would point out in the first place that the course of action chosen by the Council in restoring the refunds for the future cannot have a direct bearing on the question of the limits to the compensation for loss of income from the refunds abolished: it is to the judgment of 19 October 1977 that one must look for the criteria for settling that question, since the object of compensation is to make amends for the infringement of the principle of equality, and it must therefore be measured in accordance with the scale of that infringement. The interest of the said regulations lies rather in the fact that they reflect the interpretation given by the Council to the judgment cited: in fact I have already had occasion to remark that in the second and third recitals in the preamble to Regulation No 1125/78 reference is made to the decision of the Court and it is stated that the introduction of production refunds for the products in question constitutes a means of conforming with the Court's conclusions. Equally explicit, in the reasons on which the two regulations of 22 May 1978 are based, is the reference to the ‘possibility of substitution in the bakery industry between starch and quellmehl’ (first recital in the preamble to Regulation No 1127/78) and to the fact that ‘starch may be in direct competition with quellmehl used in baking’ (first recital in the preamble to Regulation No 1125/78).
A factor having an important bearing on the question is the recent decision of the Court in Case 90/78 Granaria, dated 28 March 1979. You will recall that the Granaria company, a quellmehl producer, after requesting the Council and the Commission in vain to pay it the production refunds for the period subsequent to 1 August 1974, brought proceedings against the two institutions before the Court, involving an action for failure to act and at the same time an action for damages. The judgment cited declared the first action inadmissible, and dismissed the second action for lack of proof that the quellmehl was ‘used for the purpose envisaged by the scheme’ (that is to say, the refunds scheme). In the decision, the judgment of 19 October 1977 in Joined Cases 117/76 and 16/77 was examined and an attempt was made to establish its exact scope. It was interpreted as meaning that ‘the principle of equality is breached to the detriment of quellmehl producers only on the assumption that quellmehl is put to its traditional uses in food for human consumption’. The Court added that in the course of the proceedings the parties had not introduced any new factor capable of altering that view.
The Interquell Stärke-Chemie company, the applicant in Case 261/78, has now produced documents purporting to prove that pre-gelatinized starch and quellmehl are interchangeable for the purpose of manufacturing certain feeding-stuffs; in particular it referred to the opinion of an expert. Professor Hermann Zucker, of 29 March 1979, which states that the two products are interchangeable and and that they were used in mutual competition in the animal-feed industry between 1974 and 1977. However, the Commission replied that those statements do not succeed in proving that there really was widespread use of starch in that industry. Then with regard to a letter from the Fachverband der Futtermittelindustrie [Confederation of the German Animal-feed Industry], included amongst the applicant's documents, the Commission observed that it merely included maize starch amongst the products whose presence is permitted in feeding-stuffs. The Council and the Commission maintained that starches of a type different from that obtained from maize are also used in animal feed; in that regard, as it is a question of products other than that which benefits from the refunds scheme, the existence of a competitive relationship with quellmehl would not, it is argued, go to prove that quellmehl is entitled to Community aid also when intended for use in animal feed.
In order to obtain satisfactory conclusions on this question it would be necessary for the Court to commission an expert's opinion to establish not only whether and to what extent maize starch was used in animal feed between 1974 and 1977, but also to what degree starch and quellmehl really were interchangeable, having regard to economic expediency and technical suitability (the Council objected inter alia that unlike quellmehl starch cannot be used as animal feed without adding to it other nutritional materials). However, I consider that the claim of Interquell Stärke-Chemie must be countered by another set of considerations. I have already observed that the scope of the compensation must be in accordance with the scope of the unlawful act, as determined by the judgment of 19 October 1977; in fact we have seen already that the present cases have not reopened the issue of the unlawful act's existence, but have taken for granted the findings of the Court in the aforesaid judgment. Moreover, in interpreting that judgment in the decision in Case 90/78, Granaria, the Court considered inter alia that the scheme of refunds for quellmehl was designed to support that product in so far as it is used for human consumption (that emerges clearly from paragraph 10 of the decision). I will note in parenthesis that that interpretation coincides with the one which follows from the third recital in the preamble to Regulation No 1125/74, which reads: ‘… the production refund for quellmehl was initially granted with a view to promoting certain specific uses of quellmehl as a fo for human consumption, account bong taken of the possibility of its competing with a number of other products’. If it is true that quellmehl benefited from Community aid in connexion with the purpose mentioned, the question of equality of treatment with starch and of any discrimination has no reason to be raised in respect of quellmehl intended for animal feed: being outside the scope of the refunds scheme, the product having such a use could not in any case have claimed treatment equivalent to that of starch, irrespective of the uses of the latter product. Nor could it validly be argued that until 1 August 1974 the refunds were in fact paid for all the quantities of quellmehl produced; let us not forget that as from that date the Council abolished the refunds (and subsequently sought to justify that measure by referring to the increased use of quellmehl as animal feed), that the discussion now concerns compensation for the damage caused by the infringement of the principle of equality, and that the abolition of the refunds for quellmehl intended for animal feed was not considered by the Court to constitute unlawful discrimination, in view of the restrictive interpretation given to the function of the scheme of Community aids.
There remains the question common to applications 238, 261 and 262/78: namely whether damages must be assessed in relation to the quantities of quellmehl used in food for human consumption, or limited to the quantities used for baking (in accordance with the approach adopted by Regulations Nos 1125 and 1127/78). I believe that, if the solution must depend on the determination of the limits of the unlawful act which may be inferred from the judgments of 19 October 1977, with the interpretative contribution of the judgment of 28 March 1979 in the Granaria case, it is right to favour the wider view. In fact the Ruckdeschel and Granaria judgments both refer to quellmehl used ‘in food for human consumption’ (see paragraph 9 of the decision in both cases). Therefore it must be assumed that compensation is also payable for the damage consisting of the loss of income from the refunds for quellmehl intended for uses in food for human consumption other than baking.
14.
In conclusion I propose that the Court should decide in the following way on the actions brought under Articles 178 and 215 of the EEC Treaty by the undertakings producing quellmehl and gritz (Joined Cases 64 and 113/78, 167 and 239/78, 27, 28 and 45/79; Case 238/78; Joined Cases 241, 242, 245 to 250/78 and Joined Cases 261 and 262/78):
(a)
Declare the principal claims for damages admissible, up to the amount of the production refunds not paid during the period when they were abolished; including the claim of Ireks-Arkady in its capacity as assignee of the claim to damages of Albert Ruckdeschel & Co. (Case 238/78);
(b)
Declare inadmissible the claims in the alternative made in Case 238/78 and in Joined Cases 241, 242, 245 to 250/78, that the European Economic Community be ordered to authorize and compel the Federal Republic of Germany, the Kingdom of Belgium and the Kingdom of the Netherlands to pay to the applicants sums equivalent to the refunds not paid during the period in which those refunds were abolished;
(c)
Also declare inadmissible the incidental claim for clarification made by the Ireks-Arkady undertaking, concerning the interpretation of Articles 2 and 4 of Commission Regulation No 1570/78 (Case 238/78);
(d)
Declare the European Economic Community liable under Articles 178 and 215 of the Treaty for the damage sustained by the applicant undertakings through the infringement of the principle of equality and more particularly through the discriminatory treatment as against the producers of maize starch resulting from the abolition of the production refunds for quellmehl (Regulation No 1125/74 of the Council of 29 April 1974) and for gritz (Regulation No 665/75 of the Council of 4 March 1975); the unlawfulness of that abolition having already been established bv the judgments of the Court of 19 October 1977 in Joined Cases 117/76 and 16/77 and Joined Cases 124/76 and 20/77;
(e)
Declare the European Economic Community obliged as a result to pay to the applicants damages of an amount equivalent to the refunds not paid during the period from 1 August 1974 to 19 October 1977 for quellmehl and from 1 August 1975 to 19 October 1977 for gritz, to an extent proportionate to the quantities of maize and common wheat used to manufacture quellmehl intended for human consumption, and to the quantities of maize used to manufacture maize groats and meal (gritz) used by the brewing industry, and using as a basis of calculation the units of account per tonne paid in the same period by way of production refunds for the maize used in the manufacture of starch, together with interest to compensate for delay in payment;
(f)
Declare that the payment of further compensation for the damage resulting from the same unlawful act, claimed by the applicants in Cases 64 and 113/76, 167/78, 27 and 45/78, may not be added to the payment of the amounts referred to in the previous paragraph, and therefore may be granted only if the total damage exceeds the aforesaid amounts, and only to the extent of the excess;
(g)
Grant to the applicants in Cases 64 and 113/76, 167/78, 27 and 45/79 a period of three months in which to give details of their claims for further damages, and to complete the documents already produced for that purpose, or, as the case may be, to inform the Court of the figures on which they have been able to reach an agreement with the Council;
(h)
Provide, in the event of such agreement on the further damage not being reached, for the documents produced by the above-mentioned applicants to be examined by a committee of experts, in order to determine the existence and the origin of the items of damage complained of by them, and to assess the scale thereof in monetary terms; reserving the right to determine by means of a subsequent order the composition of the committee of experts, to lay down its terms of reference and to appoint its members;
(i)
Order the European Economic Community to pay the costs and legal fees incurred by the applicants in Cases 239/78, 28/79, 238/78, 241, 242, 245 to 250/78, 261 and 262/78, reserving the decision on costs as regards the applicants in Cases 64 and 113/76, 167/78, 27 and 45/79, until the final decision on the further damages claimed by them.
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