61969C0002
OPINION OF MR ADVOCATE-GENERAL GAND
DELIVERED ON 21 MAY 1969 (
1
)
Mr President,
Members of the Court,
This request for the interpretation of certain articles of the Treaty of Rome, submitted to you by the Vrederechter of the Second Canton of Antwerp, is important for more than one reason. First, because it arises from a dispute concerning the contribution, introduced by the Belgian Laws of 12 April 1960 and 28 July 1962, which importers of unworked diamonds are required to make to the Sociaal Fonds voor de Diamantarbeiders. Before referring this matter to you, the national court gave lengthy consideration to the much discussed problem of the relationship between the Treaty and subsequent legislation and came to a conclusion along the lines of your judgment of 15 July 1964 in Costa v ENEL (Case 6/64 [1964] ECR 585). Furthermore, you will be dealing once again, in relation to a specific case, with concepts which have been the subject of a great deal of case-law, such as those of a ‘charge having equivalent effect’ and of ‘internal taxation’ and you will have to fix the limits of the rights of States. Finally, I would add that the issues raised here are not unconnected with those which you will be called on to consider in Case 24/68, brought by the Commission of the Communities against the Italian Government over the statistical levy imposed by that State on imports and exports.
I
Although the issues concern, and can only concern, the interpretation of Community provisions, in this instance Articles 9, 12, 13, 18 and 95 of the Treaty, their scope can only be understood and a proper reply given if they are looked at in the context of the dispute which gave rise to them at national level. For this reason I propose to deal with this aspect first.
1.
The Law of 12 April 1960 established in Belgium a social fund for diamond workers (Sociaal Fonds voor de Diamantarbeiders) similar to those already in existence for other categories of workers, the purpose of which is the financing, award and payment of additional social benefits to such workers. Under Article 2(a) of that Law, as amended by the Law of 28 July 1962, the Fund is financed by means of contributions payable by all importers of unworked diamonds at a rate of of the value of the unworked diamond imported. However, the second subparagraph of the same article states that the King may grant exemption from contribution where the value of the diamond does not exceed BF 300 per carat or where it is imported from the Netherlands within the framework of the exchange agreement between the diamond industries of Belgium and the Netherlands.
Thus, the charge (or contribution to employ the term used by the Belgian Law) is intended to provide benefits for diamond workers, that is, for the employees who work the diamonds on behalf of manufacturers and industrialists. It is imposed on merchant importers, who may also be industrialists although this is not necessarily the case. They are, at all events, liable in their capacity as importers and their liabilities are assessed on the basis of the value of the imported product. In its observations the Belgian Government pointed out to you that ‘as a result of internal factual circumstances’, it had appeared to be neither equitable nor possible to make the employer liable for this ‘social security contribution’ and that it had been necessary to calculate it on the basis of the imported raw material. It is not for me to go into such matters in detail: it must be understood to mean that this industry is closed and clannish and its structure is such that social legislation can only be applied to it with difficulty. It was also maintained that importers benefited, at least indirectly, from the labour of diamond workers.
2.
The conditions of application of the Law and the position of the diamond market in Belgium have been described at length by the representatives of the parties to the main action, both in their written statements and at the hearing. Without going into detail, let me point out that Antwerp is more than merely a centre of the diamond industry; it is the centre of the international diamond market in which world prices are determined. Antwerp is the principal customer of the Diamond Trading Co., the distribution centre for De Beers, and also receives unworked stones from other sources, in particular from other States of the Community which are no more producers of diamonds than is Belgium. The raw material for the local industry and the products of that industry are traded in this market which also sells very large quantities of unworked and worked diamonds intended for other centres. The perfection of the organization, which is the result of a long tradition, is such that orders may be placed with firms operating in its for diamonds, both unworked and worked, on the faith of a detailed description.
What must be emphasized is that Antwerp is especially important as a market for industrial diamonds which are merely a variety of unworked diamonds destined for this particular use because they are unsuitable for cutting and use in jewellery but which may sometimes have to be classified before their final use can be definitely established. Although the Law of 1962 exempts from the contribution unworked diamonds the value of which does not exceed BF 300 per carat, diamonds classed as industrial may be worth much more. They are then liable to the charge even though they are not dealt with by the diamond industry. Similarly, it no longer seems to be contested that in general (except for goods ‘in transit’ or rejected at the time of importation) diamonds re-exported in the same condition without having been cut are also taken into account in calculating the contribution.
3.
As they considered that the contribution laid down by the Law of 28 July 1962 amounted in fact to a charge having an effect equivalent to a customs duty within the meaning of Article 12 of the Treaty, various trade associations and importers of unworked diamonds submitted to the Commission at the end of that year a complaint that in their view the Belgian State had failed to fulfil its obligations.
After first replying that before defining their position they preferred to wait until a court submitted to you an application for a preliminary ruling, the Community authorities informed the complainants in 1967 that in their opinion the contribution in dispute did not fall within the ambit of the provisions of Article 12.
These authorities then took up the question again from another angle. As I have already said, the second subparagraph of Article 2(a) of the Law exempts from the charge diamonds imported from the Netherlands in the context of the exchange agreement between the diamond industries of that country and Belgium. As it considered that, in contravention of Article 7 of the Treaty, this provision was discriminatory in nature, the Commission invited the Belgian Government on 29 February 1968, in the context of Article 169, to amend its legislation on this point and proposed the following alternative:
‘—
either to extend the provision regarding exemption to imports of unworked diamonds from all Member States on the same conditions as those granted to the Netherlands;
—
or, on the contrary, to abolish the exemption in favour of the Netherlands.’
The choice of the terms of the alternative implies an attitude towards the nature of the contribution in question which is also found in the observation submitted to you by the Commission. I would add that on 20 January 1969, in the absence of any observations submitted by the Belgian Government, the Commission delivered the reasoned opinion provided for in Article 169.
4.
At the same time as these steps were being taken at Community level, other proceedings were begun before the competent Belgian court in which some 200 importers, against which the Social Fund brought an action for payment of these contributions, based their defence on the provisions of the Treaty. It was in these circumstances that the Vrederechter of the Second Canton of Antwerp chose two test cases, the Brachfeld case (involving an importer of unworked diamonds) and the Chougol case (involving an importer of industrial diamonds), entered in your Register under the numbers 2/69 and 3/69 respectively, and requested you in identical judgments of 24 December last to interpret certain articles of the Treaty.
The Vrederechter considers it necessary to the settlement of the action to verify whether the contribution in question is covered by one of the concepts of customs duty, charge having equivalent effect or internal taxation referred to in Articles 9, 12 and 95 of the EEC Treaty, as in his opinion the fact that it is imposed for the benefit of the Social Fund, which is, in addition, a public body, does not exclude this possibility.
To obtain a definition of these various concepts and to determine the outline of each one, the Belgian court proceeded by a series of questions, which became more and more precise and detailed, but which were not all of equal interest. It is these questions, six in number, some of which are sub-divided and which are set out in the report of the hearing, which I must now consider. I shall do so in the light of the factual observations which I have just made, without forgetting, however, that although your replies must be of help in reaching a decision in the main action, you are only required under Article 177 to interpret the Community provisions and not to apply them to a specsific case, much less to decide whether a provision of national law is in accordance with the Treaty. It will be for the Vrederechter, Antwerp, to draw from your reply the factors which will enable him to come to a decision on this point.
II
A —
Question 1, which concerns Articles 9, 12, 13, 18 and 95 of the Treaty, asks you, first, whether the duties or charges having equivalent effect referred to in those articles or in certain of them must have ‘all the characteristics of a charge of a fiscal nature’ and, secondly, whether these duties or charges are restricted to those which provide revenue for the Treasury or serve to reduce its burdens, or whether they include in a general way all those which a Member State imposes when imports are made, whatever their purpose, be it fiscal, administrative or social.
The reason for this question is perfectly clear. The ‘contribution’ in dispute — this is the term used by Belgian law, which never mentions the words charge or tax — differs in its designation and purpose from the traditional types of taxation on goods. It is one of the manifestations of a fairly widespread modern phenomenon covered by the rather vague term of quasi-taxation (‘parafiscalite’). The first step is thus to find out whether it may fall within the scope of one of the articles referred to without at present specifying which one.
It is difficult and undoubedly serves no useful purpose to give a precise reply to the first part of the question. Although the term taxation is to be found in various passages of the Treaty and the Protocol on the Privileges and Immunities, it does not necessarily always have the same meaning and the reply which you gave in your judgment in the Klomp case of 25 February last (23/68 [1969] E.C.R.) may not in any way be transposed to the present case, contrary to the view put forward by the applicant in the main action. Furthermore, the court which refers this matter to you appears to rely on a concept of a ‘charge of a fiscal nature’ which may have some precise meaning in Belgian law and a different meaning in the law of other Member States.
On the other hand, the second part of the question may receive a more direct and adequate reply, heralding the replies which will be given to the subsequent questions. From the moment that a State — or a body to which it has delegated its authority — imposes charges or taxation on the import of goods, the question arises of their compatibility with the Treaty. It is unnecessary to ascertain whether they enrich the Treasury or are, on the contrary, paid into a special fund, nor can charges or taxation (except for charges for services rendered which must be strictly defined) be excluded from the scope of the Treaty by reason of their fiscal, social or administrative purpose.
B —
The purpose of Questions 2, 3 and 4 in respect of the same articles is to determine whether the decisive factor is the nature of the imposition or its effect, whether the equivalent effect lies in an identity of purpose or in an identity of results of the imposition and whether the results must be assessed from the point of view of the amounts collected or from that of their influence on the free movement of goods. In other words, it is necessary to decide which are the decisive factors in order to assess, in relation to the Treaty, the customs duties and charges having equivalent effect referred to in Articles 9, 12 and 13 and the internal taxation on imported goods referred to in Article 95. A distinction must be made on this point.
First, as regards customs duties, the relevant articles of the Treaty apply to all duties described as such in the various national laws, including customs duties of a fiscal nature, and payable by sole virtue of the fact that the goods in question cross a frontier. The designation is alone sufficient and there is no need to inquire into the effects which may differ according to the particular case.
In addition to customs duties, the Treaty refers to charges having equivalent effect with which you have had to deal on several occasions since your judgment of 14 December 1962(Commission of the EEC v Grand Duchy of Luxembourg and Kingdom of Belgium, Joined Cases 2 and 3/62 [1962] E.C.R. 425). For the present I shall only consider those elements in your case-law which are relevant to a solution of the questions submitted. It follows that neither the designation of the charge, nor its technical features, nor the purpose pursued by the State in imposing it is decisive; what matters in deciding whether the charge belongs to this category is a consideration of its effects in the light of the objectives of the Treaty, in particular with reference to the free movement of goods, and it is of little importance whether all the effects of a customs duty are present, or only one of them, or whether other principal or secondary aims were also pursued.
There remains ‘internal taxation’, which in Article 95 is followed by the words ‘of any kind’. This may be seen as an indication that here also neither the designation, the technical features, nor the purpose pursued by the public authorities is decisive.
C —
However, these indications only constitute a first approach to the problem. In Question 5(a) and (b), you are asked whether the concept of obstacles to trade always presupposes that the duty imposed is discriminatory or protective in effect and whether obstacles to trade could exist in the absence of competition from domestic products.
This question is submitted in connexion with Articles 9 and 12 (that is, in connexion with charges having equivalent effect), but it is also relevant in defining the internal taxation referred to in Article 95 since Articles 12 and 13 on the one hand and Article 95 on the other cannot be jointly applied to the same case (16 June 1966, Lütticke, Case 57/65, [1966] E.C.R. 205).
First let me make some observations regarding terminology: the Commission observes, in connexion with the way in which this question is formulated, that Articles 9 and 12 do not refer to obstacles to trade and that, in certain circumstances and by virtue of other provisions of the Treaty, taxation or charges may be imposed on imported products and the effect of this is always, to however small a degree, to restrict imports. This observation is correct but the fact remains that the articles the interpretation of which is sought are included under Title I of Part Two, entitled ‘Free movement of goods’, which is the indication of a principle and of the intention of the authors of the Treaty to eliminate such obstacles to trade. Nevertheless, the two parts of the question submitted are closely connected: if a charge having equivalent effect within the meaning of Article 12 exists only if its effects are protective or discriminatory, a charge on an imported product which has no competition on a national level necessarily falls outside the scope of Article 12.
It may well be asked whether the answer to this question has not already been given in your judgment in Joined Cases 2 and 3/62 referred to earlier, from which I quote the following passage:
‘A charge having equivalent effect … whatever it is called and whatever its mode of application, may be regarded as a duty imposed unilaterally either at the time of importation or subsequently, and which, if imposed specifically upon a product imported from a Member State to the exclusion of a similar domestic product, has, by altering its price, the same effect upon the free movement of products as a customs duty.’
This concept is expressed in almost identical terms in your judgment of 8 July 1965 in the Waldemar Deutschmann case (Case 10/65, [1965] E.C.R. 469) as well as in your judgment of 16 July 1966 in the case of the Federal Republic of Germany v Commission of the EEC (Joined Cases 52 and 55/65, [1966] E.C.R. 159). It thus appears to be very comprehensive to the extent to which the discriminatory effect—‘however small it may be’ in the words of the judgment in Joined Cases 52 and 55/65 — is sufficient for a charge on imported products to have an effect equivalent to a customs duty, although it is confined to the hypothesis that a similar domestic product exists.
I believe that it is useful to examine this case-law more thoroughly, to clarify it and, if necessary, to amend it. It will first be noted that in the cases which gave rise to the judgments to which I have referred the imported products were always in competition with similar domestic products. Within the context of the problems submitted to you, it was sufficient to establish the discriminatory nature of the charge in order to accept that its effect was equivalent to that of a customs duty.
Furthermore, you have always asserted that the legality of a tax should be determined ‘in the light of the objectives of the Treaty’. According to Article 3 these are, in particular:
(a)
The elimination, as between Member States, of customs duties and of quantitative restrictions on the import and export of goods, and of all other measures having equivalent effect;
(b)
The establishment of a common customs tariff and of a common commercial policy towards third countries;
(c)
The institution of a system ensuring that competition in the Common Market is not distorted.
To achieve these objectives the Treaty prescribes the elimination of all customs duties and makes no distinction according to whether the products affected are or are not in competition with domestic products. Thus, by virtue of Article 17, the provisions relating to the elimination of customs duties shall also apply to customs duties of a fiscal nature. It is in the same spirit that the Treaty provides for the abolition of export duties. It may therefore be contended that the aim is not merely to abolish discrimination or the protection of the national industry but of all obstacles to trade.
Consequently, this concept is not absent from your case-law. Of course, you referred first to the idea of discrimination and you considered that, once such discrimination was established, a charge having equivalent effect existed since, however slight such discrimination, it was likely to distort competition and to create obstacles to trade and was therefore contrary to the objectives of the Treaty. But although discrimination is more often than not a feature of a charge having equivalent effect, it does not necessarily follow that it is a condition sine qua non of its existence.
By definition, customs duties only apply to goods crossing a frontier and to justify their prohibition it is sufficient to establish that they constitute an obstacle to the free movement of goods. The same criterion may be applied to charges which, although not appearing to be customs duties, form in the same way an obstacle to the free movement of goods without, however, being included in the general system of internal taxation referred to in Article 95 of the Treaty.
However, it the creation of an obstacle to trade is adopted as the only criterion there is no need to distinguish between charges imposed on goods for which there are corresponding domestic products and those imposed on products which do not meet such competition, as the fact that certain goods are not produced in a Member State cannot confer on that State the right to impose import duties on such goods within the context of Article 12. Free movement of goods which is the objective of Title I of Part Two of the Treaty is a rule which applies equally to all products within the Community.
It may be objected that such a strict concept of freedom of trade ignores the facts and that so small a charge as, for instance, the ‘contribution’ which gave rise to the action before the Vrederechter, Antwerp, cannot in reality have any influence on the market. But every effort must be made to avoid anything which might open a breach in the system founded on the prohibition of customs duties and charges having equivalent effect. This is a danger which is already referred to in your judgment in Joined Cases 2 and 3/62 and the creation of special funds financed by contributions imposed on the import of goods would be one of the ways to which States might be particularly tempted to resort in order to circumvent the provisions of Articles 9 and 12 of the Treaty.
To sum up, I consider finally that an obstacle to the free movement of goods may exist even if a charge having equivalent effect has no discriminatory or protectionist consequences and even if there is no competition from domestic products. This solution, however, is not obvious; in case you should not adopt it I should like to define my attitude to certain points raised in the Commission's observations which exceed the scope of the question as submitted by the Belgian court. On the basis not of Articles 9 and 12 but of Article 95, the Commission points out that your caselaw (especially your judgments in Cases 27/67 and 31/67 of 4 April 1968) accepts that it is possible to impose internal taxation on products from other Member States which do not compete with similar or substitute products. You decided that this was the case as regards taxation imposed within the framework of legislation concerning turnover tax, that is, a general charge imposed without distinction on all categories of products both domestic and imported, as you considered that when such taxation is imposed on imports it is intended to put on a comparable fiscal footing all categories of products whatever their origin, and that there is no reason for certain imported products to enjoy a privileged position because no similar domestic products exist to be protected.
However, you laid down the condition that the rate fixed for these products shall remain within the general framework of the system of taxation in question. From this starting point, the Commission states that on the basis of the Treaty no Member State can be denied the right to introduce special internal taxation on products for which no corresponding products of domestic manufacture exist. Subject to the condition that in such a case the rate of taxation is not to exceed ‘the internal taxation as a whole imposed on these products and others’, there can be no more justification in this case for granting tax privileges in respect of products which are not manufactured in the country than in the case of the general system of turnover tax.
I would merely say that in my opinion the assimilation of these two cases appears debatable as, if the taxation is special, there cannot by definition be any question of putting the product which is subject thereto in a comparable position to that of other products, and if the imported goods which do not compete with a domestic product were not subject to the tax it would not enjoy any special privilege. But, here again, we are dealing with an issue outside the framework determined by the Belgian court.
D —
In the remainder of Question 5 the Belgian court is attempting to clarify the scope of Article 12 by comparing it successively with other articles of the Treaty. But the various problems which it refers to you are at times presented in somewhat obscure terms and seems to be less directly connected with the action.
—
Referring first to Articles 9 and 18, the court asks you whether a new charge imposed on imports coming from all foreign countries is always prohibited as being likely to create obstacles to the achievement of the objectives set out in Articles 9 and 18 of the Treaty, that is, the adoption of a common customs tariff in relations with third countries and the reduction of customs duties below the general level, with the result that it would be unimportant whether or not such a charge had a discriminatory effect.
The Commission merely points out, and quite rightly, that Article 18 may be considered to be a declaration of intent or a statement of principle. It concerns the policy to be practised as regards the level of customs duties applicable to imports from third countries. It visualizes the conclusion of agreements designed, on a basis of reciprocity, to reduce customs duties below the general level of which Member States could avail themselves as a result of the establishment of a customs union between them. Furthermore, Article 12, which is here alleged to be on a par with Article 18, dealt solely with intra-Community relations. These are two different subjects. In any case it is hard to see how the charge referred to by the Belgian court is necessarily contrary to Article 18.
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The court then considers Article 37. Must the distinction which was made in this article between monopolies which do and those which do not result in discrimination between the nationals of Member States as regards the conditions under which goods are procured and marketed also be made between the duties and charges referred to in Articles 9 and 12?
This is precisely the question submitted and I have to say that its scope is not quite clear to me. It appears to assume that Article 37 — which, as you know, is not couched in the clearest terms — distinguishes between two types of monopolies according to whether or not they are discriminatory in effect, even though its aim is to adjust any State monopoly of a commercial character so as to ensure that when the transitional period has ended no discrimination exists between nationals of Member States.
All that may be said in reply is that it does not seem possible to draw from this article any conclusion as to the interpretation of the concept of a charge having equivalent effect.
—
The court making the reference then turns to Article 95. It asks whether the prohibition laid down in Articles 9 and 12 is more absolute in nature than that provided for in Article 95 and especially whether it does not make any distinctions according to whether or not the duties in question are in excess of those imposed on domestic products.
What is meant exactly by ‘more absolute nature’ in respect of a prohibition? I consider that, posed in these terms, no precise answer can be given to this question. All that may be noted is that charges having equivalent effect and internal taxation constitute different fields and are not subject to the same system, in particular as regards the detailed rules and the timetable laid down for their abolition or adjustment. With regard to the point which appears to worry the Antwerp court, it must be noted that a charge having equivalent effect is unlawful solely by virtue of the fact that it constitutes an obstacle to trade, whereas internal taxation is unlawful only if, and to the extent to which, it is imposed more heavily on imported products than on domestic products.
—
Lastly, and here again I quote from the judgment by which this matter was referred to you, the question is posed whether Article 12 may be considered to be a first step towards the achievement of the aim of Articles 9(1) and 13, and may therefore be interpreted in such a wide sense.
Article 12, which imposes an obligation to refrain from taking action, a standstill obligation, is more a point of departure than a first step. It prepares the way for the abolition of customs duties and charges having equivalent effect provided for in Articles 9(1) and 13. All that may be added is that the concepts embodied in Article 12 must have the same meaning and scope as the corresponding concepts in Articles 9 and 13.
E —
Sixth and final question. It is noted in the judgment referring the matter that a special feature of this action is that the applicants in the main action are importers of a raw material who consider that they have been injured by their own government, and that they are unable to show that a producer of a similar raw material is favoured within the State which has taken the measure in dispute, as Belgium produces no diamonds of its own. They may, however, consider themselves to have been placed at a disadvantage in relation to their competitors in other countries who are not required to bear such a charge. On the other hand, Belgian undertakings which work diamonds enjoy an advantage in relation to those in other Member States, and that at the expense of importers, since the latter have to bear a part of the social security contributions which ought to be borne by such undertakings themselves.
On the basis of these findings, the court asks the question whether, in assessing the obstacles to trade referred to in Articles 9 and 12, only the injuries suffered by the other Member States or their nationals must be taken into consideration or whether account must also be taken of that suffered by all the nationals of the Community, including those of the Member State which has taken the measure in question, if only by reason of the greater competition which they have to face from nationals of other States.
In my opinion it is sufficient to note that Articles 9 and 12 take into consideration customs duties and charges having equivalent effect to the extent to which they constitute obstacles to the free movement of goods. Once these conditions have been fulfilled, it does not very much matter in which country of the Community the people bearing the injury resulting from these measures are to be found.
If I now sum up the answers which might be given to the questions submitted to you, accepting that you consider that they all call for a reply, my conclusions would briefly be as follows:
—
The duties and charges referred in the articles of the Treaty which have been cited are all those imposed by a State on the import of goods without there being any need to determine whether they enrich the Treasury or whether their purpose is fiscal, social or administrative.
—
Although customs duties are those which are so described in the laws of Member States, a charge having equivalent effect is characterized by its effect on the free movement of goods within the Common Market.
—
A charge having equivalent effect may result in an obstacle to trade, even if there is no competition from a domestic product.
—
Neither Article 18 nor Article 37 are relevant to the interpretation of Articles 9 and 12 of the Treaty.
—
These last two articles lay down a prohibition which is different in scope from that provided for in Article 95 and which does not involve the distinctions provided for in that article as regards internal taxation.
—
Article 12 is the point of departure for the realization of the objectives laid down in Articles 9 and 13.
—
Finally, in the assessment of obstacles to the free movement of goods created by customs measures or measures having equivalent effect, the nationality of the persons who are adversely affected thereby need not be taken into account.
In my opinion the decision as to costs incurred before this Court is a matter for the Vrederechter of the Second Canton of Antwerp.
(
1
)	Translated from the French.