Joined opinion of Mr Advocate General Cosmas delivered on 26 November 1996. - Commission of the European Communities v Kingdom of the Netherlands, Italian Republic, French Republic and Kingdom of Spain. - Failure of a Member State to fulfil its obligations - Exclusive rights to import electricity for public distribution. - Cases C-157/94, C-158/94, C-159/94 and C-160/94.



European Court reports 1997 Page I-05699



Opinion of the Advocate-General

By means of four applications, which, for reasons of practicality, I shall consider together, the Commission has asked the Court to declare that, by granting exclusive rights to import (and, in the case of the French Republic, the Kingdom of Spain and the Italian Republic, to export) electricity (and, in the case of the French Republic, natural gas) the defendant Member States have failed to fulfil their obligations under Articles 30, 34 and 37 (and, in the case of the Kingdom of the Netherlands, Articles 30 and 37) of the Treaty and also, in the case of the Kingdom of Spain, under Article 48 of the Act concerning the Conditions of Accession of the Kingdom of Spain and the Portuguese Republic and the Adjustments to the Treaties (OJ 1985 L 302, hereinafter `the Act of Accession').

The United Kingdom has intervened in the actions in support of granting the applications, Ireland has intervened in support of dismissing them, and the French Republic has intervened in support of dismissing the applications directed against the Kingdom of Spain, the Italian Republic and the Kingdom of the Netherlands.

A brief description of the subject-matter of the applications is sufficient to show the quite exceptional interest of the questions which they raise. The Court is asked to construe and apply, in a sector such as that of energy, the provisions of Articles 30, 34 and 37 (and also, as I shall explain, Article 90(2)) of the Treaty and essentially, perhaps for the first time in such a direct manner, to rule whether the concept of public service which prevails in certain Member States (if not most of them) is, at least with regard to certain decisively important aspects, compatible with the fundamental principle of the free movement of goods.

I - Community law context

1 Although the original version of the Treaty establishing the European Economic Community contains no provisions relating specifically to the subject, (1) the question of establishing a common market in energy occupied the Community from a very early date. As early as 1964 the Governments of the Member States agreed, in the `Protocol of Agreement concerning energy problems', (2) that it was necessary to create a common market in the energy sector, laying down in very general outline in the same document the data on the basis of which that policy should be determined and the objectives which it should pursue. Also, on 18 December 1968 the Commission presented to the Council a document entitled `Initial Guidelines for a Community Energy Policy' which represented the first attempt to undertake a detailed analysis of the framework for the common energy policy, to identify the main problems involved and to determine the means available to the Community institutions for resolving them.

2 No progress beyond those first steps was made for a considerable period of time. The question was raised again later, after Europe and the rest of the world experienced the two oil crises of 1973 and 1979. The new starting point was the adoption of Article 8a of the Treaty by means of the Single European Act. The prospect of completing the internal market by 31 December 1992 brought back to the agenda the question of establishing an internal market in energy as a matter of urgency. Only a few months after the Single European Act was signed, and almost before it came into force, the Council, by means of the Resolution of 16 September 1986, (3) laid down as an objective of Community energy policy, inter alia [Article 5(d)], `greater integration, free from barriers to trade, of the internal energy market with a view to improving security of supply, reducing costs and improving economic competitiveness'. On 2 May 1988 the Commission for its part published a working document entitled `The Internal Energy Market', (4) in which, after stressing that, to establish an internal energy market, it would be necessary, inter alia, to apply strictly all the relevant provisions of Community law in force, express reference was made to the need to supervise, in the light of those provisions, monopolies for the importation and export of electricity and natural gas.

3 At the same time the Commission undertook a series of legislative initiatives designed to remove, by means of harmonization rules, at least some of the obstacles to the establishment of an internal energy market. Thus Council Directive 90/377/EEC of 29 June 1990 concerning a Community procedure to improve the transparency of gas and electricity prices charged to industrial end-users, (5) Council Directive 90/547/EEC of 29 October 1990 on the transit of electricity through transmission grids, (6) and Council Directive 91/296/EEC of 31 May 1991 on the transit of natural gas through grids (7) were adopted.

4 The scope of the proposals for directives presented by the Commission on 24 February 1992 is far wider. The most ambitious element of the proposals, which, according to their preambles, constitute, after the adoption of the Directives referred to in paragraph 3, the second phase in the process of establishing the internal market in electricity (8) and natural gas, (9) is the introduction of a system of rules designed to give producers of electricity and natural gas and their customers (or at least some of them) a right of access, subject to certain requirements and limitations, to the grids of the Member States through which electricity or natural gas is transmitted from the point of production to the distributors or final users (transmission grids), and also to the grids of the Member States through which distributors supply those forms of energy to final users (distribution systems). The logic behind those proposals is clear: a right of access for producers, distributors and final users to the transmission and distribution systems (without which, of course, trading in electricity and natural gas would be impossible) is the necessary prerequisite for the establishment of conditions for effective competition in the electricity and natural gas sector, as it enables distributors and final consumers to be supplied by the producer of their choice, irrespective of where the producer is established in the Community. Nevertheless, it is also clear that in the Member States where exclusive rights of access to transmission and distribution systems have been established, the grant of a right of that kind would necessitate a review of the fundamental principles of the organization and functioning of the energy sector, ranging from measures to ensure the safety of systems to long-term planning of energy needs. In such circumstances it is not surprising that the Commission's proposals, as in the meantime amended, (10) are still the subject of negotiation in the Council at the time of the proceedings relating to these applications. (11)

5 What role do the present applications play in relation to the establishment of the internal market in energy? The Commission seeks a ruling that, irrespective of the progress achieved in drawing up the secondary legislation concerning electricity and natural gas, the defendant Member States are under an obligation to repeal certain provisions of their domestic law relating thereto, namely those granting exclusive rights to import (and, in the case of France, Spain and Italy, export) electricity and (with regard to France) natural gas. Also, according to the Commission, those provisions are contrary to the Treaty itself, in particular, firstly, Articles 30 and 34 (which prohibit, as between Member States, quantitative restrictions on imports and exports and measures having equivalent effect) and, secondly, Article 37(1), which provides as follows: `Member States shall progressively adjust any State monopolies of a commercial character so as to ensure that when the transitional period has ended no discrimination regarding the conditions under which goods are produced and marketed exists between nationals of Member States. The provisions of this Article shall apply to any body through which a Member State, in law or in fact, either directly or indirectly supervises, determines or appreciably influences imports or exports between Member States. These provisions shall likewise apply to monopolies delegated by the State to others.' In that connection, it is noteworthy that the Commission emphasizes, in the preamble to each of the proposed directives referred to above, that `the present Directive does not prejudice the application of the rules of the Treaty'. Should the present applications succeed, will the defendant States be under an obligation to repeal, or at least amend radically, the remaining exclusive rights in the sectors at issue in order to comply fully with the Court's judgment? One of the longer-term consequences of an outcome favourable to the Commission, and no doubt the most important, would be the imposition of an obligation on the defendant States to ensure, by one means or another, access to the respective transmission and distribution systems for distributors or final users who may wish to import or export electricity or natural gas. In the Commission's opinion, this would remove one of the main obstacles (if not the main obstacle) to the establishment of the internal energy market.

II - Admissibility

6 The French Republic (although emphasizing that in that connection it `relies on the Court's assessment') objects that the Commission's action is inadmissible on the grounds that the Commission did not adopt a reasoned position, except in its application, on some of the arguments put forward during the preceding administrative procedure; that, in any case, such position differs from that set out in the reasoned opinion; and that, under those circumstances, the Commission disregarded the purpose of the procedure under Article 169 of the Treaty, infringing the right of the defendant State to defend its viewpoint. The French Republic makes the following submissions:

(a) In reply to the letter before action, the French Government contended that the monopolies on the import and export of electricity and natural gas were intended to ensure the national energy supply and consequently were bound up with grounds of `public security' for the purposes of Article 36 of the Treaty. With regard to electricity, the Commission's reasoned opinion stated that Article 36 could not be relied upon and set out the reasons why the Commission considered that the removal of such monopolies could not endanger security of supply. However, according to the French Government, the arguments relating to that question in the application are quite different because, although the Commission accepts the need for centralized control of the electricity supply system, it takes the view that security of supply can be attained by less onerous means than import and export monopolies. So far as natural gas is concerned, the Commission contends before this Court that the monopoly of imports is not bound up with security of supply, relying on arguments some of which (the existence of relatively large-scale Community production, the lack of alternative medium-term outlets for the countries which export gas in the Community, the greater dependence of France on oil, which it can import freely, than on gas) were not put forward during the preceding administrative procedure.

(b) In reply to the letter before action, the French Government also sought to rely on Article 90(2) of the Treaty by alleging that the monopolies in question were justified by the services of general economic interest whose operation had been entrusted to the bodies in favour of which the monopolies had been created. Those arguments were dismissed in the reasoned opinion on the ground that in this case that provision could not be relied upon because it relates only to conduct of the undertakings referred to in Article 90(1). Nevertheless, according to the defendant State, the Commission, for the first time in its application, firstly, admits that Article 90(2) enables the Member States to grant to those undertakings exclusive rights which restrict or, in some cases, exclude competition provided that this is necessary for the performance of the particular task assigned to them and, secondly, refers extensively to the criteria for determining whether or not that condition is fulfilled.

In my opinion, those arguments of the French Government cannot succeed.

7 As the Court has repeatedly observed, (12) the purpose of the pre-litigation procedure is to give the Member State concerned an opportunity to comply with its obligations under Community law and to avail itself of its right to defend itself against the complaints made by the Commission. Therefore the reasoned opinion with which that procedure concludes must determine as clearly and specifically as possible the subject-matter of the dispute, that is to say, it must contain all the particulars necessary to enable the Member State concerned to understand the factual (13) and the legal (14) basis of the Commission's allegation that the State in question has failed to fulfil its obligations. If the reasoned opinion satisfies those requirements, the Commission's application will be admissible even though the arguments it contains, both factual (relating to the facts constituting the situation or the conduct seen by the Commission as involving a failure by the defendant State to fulfil its obligations) and legal (concerning the interpretation of the provisions of Community law which the Commission regards as having been infringed), may have been enhanced by comparison with the arguments in the reasoned opinion, provided that such enhancement does not conceal an alteration or extension to the legal and factual basis of the case as crystallized in the reasoned opinion. (15)

8 In the present case the differences indicated by the French Government between the reasoned opinion and the application do not alter or widen the subject-matter of the dispute as established in the preceding administrative procedure. From both the factual viewpoint (retention of exclusive rights of public bodies to import and export electricity and gas) and the legal viewpoint (infringement of Articles 30, 34 and 37 of the Treaty), the essence of France's alleged failure is the same in the reasoned opinion and in the application, and therefore the Member State concerned was not deprived of the opportunity to submit effectively its observations on the essential points of the dispute during the preceding administrative procedure. The situation is as follows:

(a) With regard to the need to ensure supplies, which the French Republic relies upon as justifying, in the light of Article 36 of the Treaty, the grant of exclusive rights to import electricity and gas, the reasoned opinion sets out clearly enough the substance of the Commission's argument (rejecting the French Government's submissions and arguing that security of supply could be attained by means less restrictive of imports). In the application that argument is merely particularized, so far as electricity is concerned, by an indication of the factors which, according to the Commission, constitute the concept of `security of supply', and the observation that none of those factors would be affected by withdrawal of the contested exclusive rights and, so far as gas is concerned, by the provision of certain factual information on the existing situation in the market in question.

(b) With regard to Article 90(2) of the Treaty, upon which the French Government seeks to rely, it is true that, whereas in the reasoned opinion the Commission merely stated that that provision did not concern State measures contrary to Articles 30, 34 and 37 of the Treaty, but related to conduct contrary to the Treaty by the undertakings referred to in Article 90(1), the application adds that, even assuming that Article 90(2) could justify State measures contrary to Article 30 et seq. of the Treaty, it would in any case be necessary to show, following examination of those measures in the light of the principle of proportionality, that they were necessary for performance of the particular task assigned to the undertakings for whose benefit they were adopted. However, the latter argument (which, it should be noted, is by way of an alternative: the Commission's viewpoint given in the reasoned opinion constitutes its main argument, as it does in the application, against the French Government's submissions concerning Article 90(2)) does not alter the legal or the factual basis of the defendant State's failure to fulfil its obligations or otherwise affect its right to a fair hearing, but aims precisely to refute that State's defence. Furthermore, in its reply to the reasoned opinion, the defendant State referred, at least superficially, to the question of the extent to which the contested exclusive rights are necessary for performance of the particular task assigned to the undertakings to which they were granted, pointing out (see page 15 of the document in question) that `the control of trade is technically and economically necessary for the performance of this task'. Therefore, even assuming that the Commission was not entitled to allude to that matter in the application without having previously mentioned it in the reasoned opinion, the defendant State, having considered, before the application was lodged, that the question was one relevant to the case, certainly cannot be regarded as having been denied the right to a fair hearing. (16)

9 Before going on to examine the substance of the present applications, I consider it appropriate to refer very briefly to another question.

The Spanish Government contends, in its defence in Case C-160/94, that in view of the differing energy policies of the Member States, and the diversity of the ways in which the sector is organized, the establishment of a genuine internal market in energy (particularly in the electricity sector) makes it necessary to harmonize or amend the legislation governing that sector in the other Member States and to deal with the technical problems associated with the liberalization of trade in electricity. In those circumstances, continues the Spanish Government, legislative initiatives are a method of establishing the internal energy market which is far preferable to out-and-out, uncontrolled liberalization such as that which the present applications seek to achieve. Furthermore, it concludes that it may be directly inferred from the preamble to the Proposal for a Council Directive concerning common rules for the internal market in electricity (cited in paragraph 4) that, in the Commission's opinion, complete liberalization of this market can proceed only gradually.

10 The French Republic also expresses doubts as to the objectives of the action against it. In its defence in Case C-159/94 it observes that the application refers only to the exclusive rights to import and export electricity and gas, when in France those sectors are organized in such a way that it would be pointless to abolish those rights without removing the other exclusive rights in existence (particularly the exclusive right of transmission). In that connection, adds the French Government, it is significant that the Commission's Proposals for Council Directives concerning common rules for the internal market in electricity and natural gas consider the system for importing and exporting those products not in isolation but in conjunction with the other parameters of the sectors in question. Similar reasoning is followed by the Italian Republic in its observations concerning the intervention of the United Kingdom in support of the Commission's action against Italy.

11 If the abovementioned objections concerning the appropriateness of the present applications are intended to indicate that the latter are inadmissible, those arguments cannot be accepted. The Court has consistently held that, in the context of the balance of powers between the institutions laid down in the Treaty, it is not for the Court to consider what objectives are pursued in an action brought under Article 169 of the Treaty; an action against a Member State for failure to fulfil its obligations, the bringing of which is a matter for the Commission in its entire discretion, is objective in nature. (17) From that point of view, the fact that the Commission has presented proposals for directives laying down common rules in the sectors of electricity and natural gas is of no relevance at all. Likewise neither the fact that negotiations on the subject were in progress within the Council at the time when these actions were brought nor the content of legislative measures under consideration exempts the Member States from fulfilling their obligations under the legislation which continues to govern the sectors in question until the provisions under discussion enter into force. (18)

III - Substance

A - Articles 30, 34 and 37

(a) Are forms of energy such as electricity and natural gas `goods'?

12 The term `goods', as used in Title I of the Treaty, is given a broad interpretation in the Court's case-law. As the Court stated in its judgment in Case 7/68, for the purpose of the Treaty provisions concerning the free movement of goods, `goods' means `products which can be valued in money and which are capable, as such, of forming the subject of commercial transactions'. (19) Likewise in Case C-2/90, (20) when faced with the question whether non-recyclable waste constituted `goods' as defined above, the Court replied in the affirmative (paragraph 26), stating that `objects which are shipped across a frontier for the purposes of commercial transactions are subject to Article 30, whatever the nature of those transactions'.

13 It is true that the special physical characteristics of electricity and natural gas might justify some doubt as to how far those forms of energy are `products' or `objects,' as defined above, which are subject to Articles 30, 34 and 37 (21) of the Treaty. The Court does not appear to have shared those doubts at any time. As early as its judgment of 15 April 1964 in Case 6/64, (22) the Court accepted indirectly that electricity was subject to the provisions of the Treaty concerning the removal of quantitative restrictions between the Member States. That position was expressly confirmed in the judgment of 27 April 1994 in Case C-393/92, (23) in paragraph 28 of which the Court observes that `in Community law, and indeed in the national laws of the Member States, it is accepted that electricity constitutes a good within the meaning of Article 30 of the Treaty'; that is apparent, according to the same paragraph, from the fact that electricity is regarded as a good under the Community's tariff nomenclature.

14 The Italian Republic, the only one of the defendant States which questions whether electricity falls under the heading of `goods', contends that the paragraph cited from the Almelo judgment does not take sufficient account of the natural characteristics of electricity and the conditions under which it is produced, transmitted, distributed and consumed. A detailed study of those factors leads, according to the Italian Republic, to the conclusion that the import and export of electricity are activities subject to the provisions concerning the freedom to provide services, rather than those relating to the free movement of goods. Electricity is intangible, it cannot be warehoused and it has no independent economic existence since its use can be conceived of only by reference to its applications. Furthermore, the import and export of electricity are mere acts of management of the grid in question and can only be deemed to be included under the heading of `service'. According to the Italian Government, the Schindler and ERT judgments also show that activities consisting in the import or export of goods with the sole object of providing a particular service are absorbed by the latter and therefore do not fall within the ambit of the provisions relating to the free movement of goods. The Italian Republic adds that the fact that it was necessary to introduce in Italian law provisions to the effect that electricity should, by way of a legal fiction, be deemed a `movable' shows precisely that the definition of electricity as `goods' is far from obvious.

15 That argument cannot be accepted. Irrespective of the reasons which may have led to the introduction in Italian law of express provisions defining electricity as a `movable', there is no doubt that in Community law (having regard also to the fact that `services' are subordinate to `goods', which may be directly inferred from Article 60 of the Treaty) (24) the involvement of services without which a thing cannot be used does not mean that the latter ceases to be capable of being described as a `good' if, in spite of everything, that thing corresponds to the primary and principal purpose pursued by the contracting parties. In that connection I must observe that, notwithstanding the special characteristics of electricity, that form of energy may be, and is in practice, the subject of commercial transactions in which the contracting parties (for example, the distributor and the final consumer) regard it not only as something which remains entirely independent from the various activities needed, after its production, in order to transmit, distribute and consume it, but also as something which is more important than those activities.

16 Neither the Schindler judgment nor the ERT judgment to which the Italian Government refers in this connection contains sufficient particulars to detract from that conclusion. The facts of the Schindler case (25) differ entirely from those of the present matter. In response to a question referred for a preliminary ruling, by means of which the national court asked whether lotteries fall, at least partly, within the ambit of Article 30 in so far as they entail the sending and distribution of material objects to and in another Member State, the Court replied in the negative, observing (paragraph 22) that the latter activities could not be considered independently of the lottery to which they relate, which must be regarded as a `service' activity for the purposes of the Treaty, since they are not ends in themselves and their sole purpose is to enable residents of the Member State into which those objects are imported to participate in the lottery. (26) The differences between the activity to which the Schindler judgment refers and an activity consisting in importing or exporting electricity for subsequent distribution or consumption are, I think, clear. In the latter activity, the objective of the transaction is the purchase or transmission of electricity, and the independence of that objective (as an end in itself) is not affected in the slightest by the fact that, in order to attain it, the party concerned must in all probability become a user of services supplied in return for remuneration. Finally, in paragraph 14 of the ERT judgment, (27) the Court pointed out, thus following the Sacchi judgment, (28) that trade in any kind of material used for television broadcasting is subject to the rules on the free movement of goods, and went on to say (paragraphs 15 and 16) that the grant to a single undertaking of an exclusive right to import the material and products necessary for exercising the exclusive right (also owned by that undertaking) to supply television broadcasting services did not constitute a measure having an effect equivalent to a quantitative restriction on imports unless the grant of the exclusive right of importation resulted, directly or indirectly, in discrimination against imported products. However, it certainly cannot be said that that assessment (that an exclusive right to import goods which is granted in order to facilitate the exercise of an exclusive right to supply a service is not in itself a measure having equivalent effect - and I shall revert to the exact significance of that assessment in paragraph 65 below) excludes a priori from the ambit of the provisions concerning the free movement of goods the activity of importing or exporting a good the purchase or transmission of which is connected with the supply of a service or even depends on it where, as in the case of imports or exports of electricity, such purchase and transmission are purposes which are entirely independent of the service. (29)

17 Consequently electricity and natural gas are `goods' for the purpose of Title I of the Treaty, and activities such as the import and export of those forms of energy fall within the ambit of the Treaty provisions relating to the free movement of goods.

(b) Does maintenance of the exclusive rights in question constitute an infringement of Articles 30, 34 and 37?

(aa) The relationship between Articles 30 and 34 and Article 37

18 As the Court is asked by the Commission to declare that the defendant Member States have failed to fulfil their obligations under Article 30 (and also Article 34 in the cases of France, Spain and Italy) and Article 37, the question immediately arises of the relationship between Articles 30 and 34 on the one hand and Article 37 on the other: must the exclusive rights in question be regarded as contrary both to Articles 30 and 34 and to Article 37, or should perhaps the question whether those rights are compatible with the Treaty be judged solely by reference to Article 37, in view of its special character?

19 This is by no means the first time that the Court has had to consider the relationship between Article 37 and other provisions of the Treaty. In the mid-1960s Advocate General Gand, in his Opinion in Case 20/64, (30) took the view that, to reply to the questions referred to the Court as to whether in 1959, at the material time, Articles 30, 31, 32 and 33, on the one hand, and Article 37, on the other, automatically required, in accordance with their exact meaning, the abolition of the national measures falling within the ambit of those provisions, it was necessary to clarify the relationship between Article 37 and the other provisions of the chapter of the Treaty relating to the elimination of quantitative restrictions in trade between the Member States. According to the Advocate General, there were two possible solutions: either the elements of the State monopolies of a commercial character referred to by Article 37 should be examined on each occasion and should subsequently be assessed in the light of Articles 30 and 36, or else Article 37 was to be regarded as the only one governing the question of State monopolies of a commercial character. According to that Opinion, the second solution would not totally exclude the application of Articles 30 and 36, although it would mean they would have to be applied through Article 37 to the extent to which the latter refers to the former provisions. The Advocate General inclined in favour of the second solution, concluding that the quantitative restrictions on imports and exports prohibited under Articles 30 and 34 were one of the forms which might be taken by `discrimination regarding the conditions under which goods are procured and marketed', such discrimination being connected with the existence and operation of the State monopolies of a commercial character of which Article 37 requires the abolition. However, in its judgment of 4 February 1965, the Court did not give a ruling on that question. It found that the Treaty did not require the immediate abrogation of all the measures for controlling imports existing when it entered into force but did, on the other hand, prohibit any new restriction or discrimination and impose the obligation progressively to abolish existing restrictions and discrimination, which should disappear totally by the end of the transitional period at the latest. The Court added that there was no need, under those circumstances, to decide `whether the application of Article 37 to State monopolies does or does not exclude the application of any other provision of the Chapter relating to the elimination of quantitative restrictions between Member States, the effect of both interpretations being identical in the context of the legal information supplied by the Italian court'.

20 The opinion of Advocate General Reischl in Case 45/75 (31) was similar to that of the Advocate General in the Albatros case. In the later case the Court was asked to give a preliminary ruling on various questions relating to the interpretation, in connection with a national tax on imported and domestic products in the framework of a monopoly of a commercial character, of Article 37 of the Treaty, on the one hand, and Article 95, on the other, with regard to the prohibition on imposing on products imported from other Member States internal taxation in excess of that imposed on domestic products. The Advocate General took the view (32) that, in order to reply to the questions, it was not necessary to construe Article 95, observing that, in his opinion, `Article 37 is the sole criterion for judging monopoly charges since Article 37 is the lex specialis in relation to Article 95', and in support of that viewpoint he cited the judgment of 16 December 1970 in the Cinzano case, (33) in which a question relating to the taxation of imported goods subject to a monopoly in the importing country was answered solely on the basis of Article 37 and the prohibition of discrimination for which it provides. Nevertheless, in its judgment of 17 February 1976, the Court took a different approach: (34) firstly, it examined the contested tax in the light of Article 95 and, after finding that that provision did not, under certain circumstances, prohibit the tax, it considered the same tax in the light of Article 37 of the Treaty, observing (paragraph 21) that `the fact that a national measure complies with the requirements of Article 95 does not imply that it is valid in relation to other provisions of the Treaty' and that therefore it was necessary to determine whether the contested tax, although fulfilling the requirements of Article 95, nevertheless, constituted, for the purpose of Article 37, unfavourable discrimination regarding the conditions under which goods are procured and marketed, linked with the existence and operation of a State monopoly of a commercial character.

21 The judgment in the Miritz case, (35) which was published on the same day as that in Case 45/75, dealt with a number of preliminary questions, the first of which concerned the interpretation, in relation to a charge imposed by the Member State on imported products, of Article 12 of the Treaty concerning the elimination between Member States of customs duties on imports or exports or any charges having equivalent effect, while the other two questions sought an interpretation of Article 37 of the Treaty in relation to the same charge. The first question referred directly to Article 12, but the Court's reply did not consider Article 12, following Advocate General Trabucchi on that point. The Court observed (paragraph 5) that `since the structure and character [of the charge in question] link it to the system of the German alcohol monopoly, the answer to the first question must be ascertained from the text of Article 37, which deals specifically with the adjustment of State monopolies'. (36) Further on, the Court stated (paragraph 8) that, as Article 37(1) is not concerned exclusively with quantitative restrictions on imports, but prohibits all discrimination between nationals of Member States regarding the conditions under which goods are procured and marketed, the prohibition which it imposes is not limited to imports and exports which are directly subject to the monopoly, but covers all measures which are connected with its existence and affect intra-Community trade, including therefore even charges which result in discrimination against imported products as compared with national products coming under the monopoly. In those circumstances, the Court concluded that the purpose of the obligation of the Member States under Article 37(1) is to ensure compliance with the fundamental rule of the free movement of goods, `in particular by the abolition, in trade between Member States, of customs duties and charges having equivalent effect', and that a charge of the type at issue in that case, which was introduced after the Treaty came into force, was contrary to rule requiring the maintenance of the status quo in Article 37(2).

22 Are the Rewe-Zentrale des Lebensmittel-Grosshandels and Miritz judgments compatible? A first reading might lead to the opposite conclusion since, in the former, the Court examined the charge on imported goods subject to a State monopoly in the importing State, first in the light of Article 95 and then by reference to Article 37, whereas in the latter the charge which was levied on the import of goods and was connected with the operation of a State monopoly of a commercial character was examined solely in the light of Article 37, considered as a special rule. Nevertheless, I think that the approaches in the two judgments with regard to the relationship between Article 37 and similar provisions of the Treaty are not necessarily incompatible. In the Miritz judgment, the Court appears to have accepted that levying on the imported product a tax which constitutes a `charge of equivalent effect to customs duty', which is prohibited by Article 12, necessarily involves `discrimination between nationals of the Member States regarding the conditions under which goods are procured and marketed', which is prohibited by Article 37(1) of the Treaty, where, in addition, that tax is connected with the operation of a State monopoly of a commercial character, and that, since the latter provision refers specifically to State monopolies of a commercial character, it is the only one which is applicable to this question. In the Rewe-Zentrale case, the Court, after stating that the charge referred to in the questions was, in certain circumstances, compatible with Article 95, went on to determine whether, notwithstanding, the charge constituted from another viewpoint `discrimination regarding the conditions under which goods are procured and marketed', which is prohibited by Article 37(1). Therefore the Court did not have an opportunity (and, in my opinion, it is in this respect that the judgment may differ from the Miritz judgment) to consider whether the charge on the imported goods contrary to Article 95 necessarily, where in addition it was connected with the operation of a State monopoly of a commercial character, involved discrimination regarding the conditions under which goods are procured and marketed, which is prohibited by Article 37, and whether, in that case, only the latter provision could be regarded as having been infringed.

23 Nevertheless, there is no doubt that in the later judgment of 13 March 1979, in Peureux II, (37) giving a preliminary ruling on the interpretation of Article 37 and other provisions of the Treaty relating to the free movement of goods, although the Court confirmed (paragraph 27) that Article 37 is a special rule (`specific provision'), it ruled that a national provision (prohibiting the distillation, for the purpose of manufacturing products reserved to a national commercial monopoly, of raw materials coming from other Member States - a prohibition which did not apply to identical raw materials produced within the national territory - was simultaneously, firstly, a measure having an effect equivalent to a quantitative restriction within the meaning of Article 30 and, secondly, a measure involving discrimination regarding the conditions under which goods are procured and marketed within the meaning of Article 37(1). Consequently the Court appears to have abandoned the approach taken in the Miritz judgment (examination of a national measure connected with the operation of a State monopoly solely in the light of Article 37). A similar course was followed in the subsequent judgments of 21 June 1983, Commission v France, (38) and 13 December 1990, Commission v Greece, (39) in which the national measures were held (paragraphs 27 and 50 respectively) to be contrary to both Article 30 and Article 37(1).

24 It seems, therefore, that in the Court's view a national measure may be contrary to Article 30 (and/or Article 34) as well as Article 37. However, I think that the borderlines between Articles 30 and/or 34, on the one hand, and Article 37, on the other, are such that, where a question relates to the compatibility of a national measure with those provisions, it must be the subject of a single examination which, for reasons of methodology, must begin with an analysis of the requirements for applying Article 37, that is to say ascertaining the extent to which the measure in question may be regarded as connected with the exercise by a State monopoly of a commercial character of its exclusive rights. (40) If the reply to that question were in the negative, it would be logical to examine the matter solely in the light of Article 30 and/or Article 34. On the other hand, if it were found that the requirements for applying Article 37 were in principle satisfied, it would then be necessary to consider whether the measure in question involved `discrimination between nationals of the Member States regarding the conditions under which goods are procured and marketed', which is prohibited by the latter Article.

25 That is precisely the dividing line between the respective fields of application of Article 37 on the one hand and Articles 30 and 34 on the other. The Court has repeatedly observed (41) that Article 37(1) has the object, in prohibiting `discrimination between nationals of the Member States regarding the conditions under which goods are procured and marketed', of removing, by the end of the relevant transitional period, (42) all obstacles to the free movement of goods which may arise from the existence in the Member States of State monopolies of a commercial character, and of maintaining in this way normal conditions of competition between the economies of the Member States. As the case-law clearly shows, (43) some of the greatest obstacles of this kind are national measures inseparably connected with the existence of such State monopolies which constitute quantitative restrictions on imports or exports, or measures having equivalent effect within the meaning of those terms in Articles 30 and 34. (44) Consequently, if it is shown that the national measure in question is a quantitative restriction or a measure having equivalent effect, it is not only contrary to Articles 30 or 34, but also ipso facto infringes Article 37.

26 There is only one way of ensuring that a measure of that kind does not thus automatically fall within the prohibition laid down by Article 37(1), and that is to show that the measure is justified on one of the grounds set out in Article 36 of the Treaty. In my view that follows from the need for the chapter of the Treaty of which Article 37 forms part, concerning the elimination of quantitative restrictions, to be logically consistent. Otherwise, a national measure which, despite being a quantitative restriction or measure having equivalent effect, could be based on one of the grounds set out in Article 36, would infringe the Treaty merely because it was connected with the operation of a State monopoly. However, no possible interpretation can serve as a basis for the view that such a measure may be covered by two different sets of rules, depending on the existence or otherwise of a connection with a State monopoly. I believe that my view also conforms with the Court's case-law. In the Commission v Greece judgment cited above (footnote 39), the declaration that Greece had failed to fulfil its obligations under Article 37(1) (paragraph 50) followed the Court's rejection (paragraphs 47 to 49) of the defendant State's argument that the maintenance of the measure in question (which, as is clear from paragraphs 42 to 46, was, in the Court's view, also contrary to Article 30) was justified on grounds of public security, that is to say, grounds included in the list in Article 36. (45) Nevertheless, in my opinion, the latter article should not be relied upon to justify `discrimination regarding the conditions under which goods are procured and marketed' if such discrimination does not involve a quantitative restriction or measure having equivalent effect for the purpose of Articles 30 and 34. (46) To take the opposite approach would conflict with the need, which is repeatedly confirmed by the case-law, to construe strictly Article 36 which, by laying down exceptions to the fundamental rule of the free movement of goods, cannot justify the imposition of measures other than those referred to in Articles 30 and 34. (47)

27 Taking the approach outlined above, I shall consider firstly whether the exclusive rights at issue are inseparably connected with the operation of State monopolies of a commercial character (see section (bb) below) and then whether such rights constitute discrimination between nationals of Member States regarding the conditions under which goods are procured and marketed (see section (cc) below). At that second stage I shall deal firstly (see section (cc)(1)) with the question whether such exclusive rights amount to quantitative restrictions or measures having equivalent effect and then (see section (cc)(2)) with the question whether such measures may be justified on the basis of Article 36 of the Treaty.

(bb) Are the rights at issue connected with the specific operation of State monopolies of a commercial character?

28 It is clear from Article 37(1) itself that, in using the phrase `State monopolies of a commercial character', the article applies to situations in which the national authorities are in a position to control or supervise imports and exports between Member States, or even to influence them through a body established for that purpose or a monopoly delegated by the State to a third party. (48) Consequently a `State monopoly of a commercial character' must consist of two elements:

(a) an organic element, which may consist either in the constitution, by a sovereign State measure and in any legal form, (49) of an ad hoc `body' with monopoly rights which most typically take the form of various exclusive rights, (50) or in the grant of rights of that kind to an entity of another form such as, for example, a private undertaking or a territorial public body; (51)

(b) a functional element, consisting in the capacity of the national authorities to influence intra-Community trade by means of the abovementioned `bodies' or entities, where such influence may, in accordance with the second subparagraph of Article 37(1), consist in controlling or supervising, in law or in fact, imports or exports between Member States, or any other type of direct or indirect influence, provided that it is appreciable. In order for such influence to be possible, the `bodies' or other entities must, according to the Costa v ENEL judgment (cited in footnote 22), `have as their object transactions regarding a commercial product capable of being the subject of competition and trade between Member States and [...] must play an effective part in such trade'.

Are these two elements present in the cases now before the Court and, if so, can the exclusive rights in question be considered inherent in State monopolies of a commercial character existing in the defendant States?

(i) Netherlands

29 In the Netherlands Article 34 of the Elektriciteitswet of 16 November 1989 regulating the generation, import, transmission and sale of electricity (Staatsblad 535, `EW'), provides as follows:

`1. Only the company designated for that purpose shall be authorized to import electricity intended for public distribution.

2. Paragraph 1 shall not apply to the import of electricity of under 500 V.'

Article 37 of the same Law also prohibits the supply of electricity which has not been imported into the country by the undertaking referred to in Article 34(1).

NV Samenwerkende Elektriciteitsproduktiebedrijven (`SEP') was designated by the Ministerial Order of 20 March 1990 (Staatscourant, 22 March 1990) as the undertaking with the right to import electricity for public distribution.

30 The Commission infers from the abovementioned provisions that SEP's exclusive right, to which the application against the Kingdom of the Netherlands refers, to import electricity for public distribution constitutes a State monopoly of a commercial character for the purpose of Article 37(1) of the Treaty.

31 The Netherlands Government contends, on the contrary, that there is no question of Article 37 of the Treaty being applied since:

`The contested exclusive right is not a monopoly because, as Article 34(1) in conjunction with Article 37(1) of the EW makes clear, final consumers also have the right to import electricity, provided that the electricity which they import is intended solely for their own needs.

Even if it were accepted that SEP's exclusive right constituted a "State monopoly", it would not in any event be a monopoly "of a commercial character" because SEP does not operate in accordance with commercial principles.'

32 These arguments are untenable. It is true that the abovementioned articles of the EW show that individual consumers may import electricity if it is intended for their own use. It is also clear from Article 47 of the EW that such consumers may, subject to certain conditions, transmit imported electricity through the existing grids which are in principle intended for the public distribution service. However, that does not mean that SEP's exclusive right is not a monopoly. The other undertakings, except SEP (and mainly the existing electricity distribution undertakings, of which there are approximately 40, according to the defence), have no right whatever to engage in a specific economic activity, that is to say, no right to import electricity for distribution to final consumers.

33 Even if it were accepted that the import of electricity into the Netherlands should be considered as a whole, without taking account of whether imported electricity is intended for the importer's own consumption or for distribution to final consumers, in any event SEP's exclusive right, because of its subject-matter, has such a decisive effect on imports that, even if that interpretation is accepted, it must be considered a monopoly.

It seems to me obvious that for a consumer to consider meeting his requirements by means of the direct import of electricity, his consumption would have to be so large that, firstly, he could use it as a means of obtaining an advantageous price and, secondly, the transmission costs could be amortized. I think it unlikely that there are many consumers in that position and that, in practice, the great majority will have no alternative to obtaining supplies through the public grid. (52) However, in that connection, since the subject-matter of SEP's exclusive right of importation is precisely electricity intended for public distribution, that right enables the national authorities of the Netherlands, through SEP, `to influence appreciably' electricity imports and therefore that right is, in the final analysis, a State monopoly for the purpose of Article 37(1) of the Treaty. (53)

34 Furthermore, the Netherlands Government's argument that SEP does not operate in accordance with commercial criteria has absolutely no bearing on the finding that the State monopoly in question is commercial. This finding is sufficiently justified (see paragraph 28 above) by the fact that because the subject-matter of SEP's monopoly is the importation of a good such as electricity, that monopoly makes it possible to influence appreciably the intra-Community trade in question.

35 For all the foregoing reasons, SEP's exclusive right to import electricity for public distribution in the Netherlands is a `State monopoly of a commercial character' which falls within the ambit of Article 37(1) of the Treaty.

(ii) Italy

36 In Italy the electricity industry was nationalized by means of Law No 1643 of 6 December 1962 (GURI No 316, 12 December 1962), which established the Ente Nazionale per l'Energia Elettrica (`ENEL'), a public undertaking to which the industrial undertakings in the electricity sector were transferred. Article 1(1) of Law No 1643 assigned to ENEL the functions of the generation, import and export, transmission, transformation, distribution and sale of electricity throughout Italy, irrespective of its source.

Subsequently, ENEL's rights were clearly set out by Legislative Decree No 342 of 18 March 1965 (GURI No 104, 26 March 1965), Article 20 of which expressly prohibits any undertaking other than ENEL from importing, exporting and trading in electricity, and transmitting it for third parties.

37 Likewise a number of provisions (Article 133 et seq. of Consolidated Enactment No 1775 of 11 December 1933, as amended by Law No 127 of 26 January 1942, and Law No 606 of 19 July 1959) require an authorization to be obtained to import or export electricity. The authorization is granted by the Ministry of Public Works after it has been shown that several requirements have been satisfied (including, in the case of imports, a shortfall in national production and, in the case of exports, a surplus in national production). The Commission states in its application (relying on figures said to have been supplied by the Italian Government) that, when the application was lodged, ENEL had the right, under the authorization which was granted in 1989 and is due to expire on 31 December 1997, to import or export annually, from and to European countries bordering on Italy, up to 30 000 TWh (1 TWh (terawatt-hour) = 1 000 million KWh), subject to a tolerance of 20%.

38 In those circumstances, ENEL's exclusive rights to import and export electricity, at issue in the action brought by the Commission against the Italian Republic are the subject of a State monopoly of a commercial character for the purposes of Article 37 of the Treaty. The national authorities may, through the undertaking constituted by law and enjoying those exclusive rights, control imports and exports of electricity from and to other Member States.

(iii) France

39 In France, Article 1 of Law No 46-628 of 8 April 1946 on the nationalisation of electricity and natural gas (JORF, 9 April 1946, `the 1946 Law') provides as follows:

`From the publication of this Law, the following shall be nationalized:

1. the generation, transmission, distribution, import and export of electricity;

2. the production, transmission, distribution, import and export of natural fuel gas.'

Articles 2 and 3 of the Law entrust management of the nationalized electricity and natural gas undertakings to public bodies of an industrial and commercial nature called Electricité de France (EDF), Service National, and Gaz de France (GDF), Service National (hereinafter `EDF' and `GDF' respectively).

40 It is clear from those provisions that the exclusive rights to import and export electricity and natural gas, which are the subject of this action against the French Republic and which are exercised by public bodies through which the national authorities are able to control intra-Community trade in such goods, constitute State monopolies of a commercial character falling within the ambit of Article 37 of the Treaty.

(iv) Spain

41 In Spain, Article 1(1) of Law 49/84, of 26 December 1984, on the unified operation of the national electricity system (BOE Nos 311 and 312, p. 5466, `the 1984 Law') provides as follows:

`The unified operation of the national electricity system over the high-voltage networks is a public State service, the purpose of which is to optimise the system as a whole on the basis of the functions and activities set out in Article 2 of this Law. The service shall be managed by a State company in accordance with the present Law and the provisions adopted for its implementation.'

Article 2(1) of the Law specifies the functions and activities comprising the public service, which include:

`[...]

(e) to operate and maintain [..] all international connection facilities [...];

[...]

(i) to engage in such international trade as is considered appropriate in order to ensure the supply of electric energy, to reduce production costs on a national scale or, for reasons of national interest, to allocate to each undertaking its share of such international trade and monitor the conduct thereof.'

These functions and activities were assigned to a State corporation called Red Eléctrica de España (`Redesa') by Royal Decree 91/85, of 23 January 1985 (BOE No 24, p. 448, `the 1985 Royal Decree'), adopted pursuant to the 1984 Law. (54)

42 According to the Commission, it is quite clear from the abovementioned provisions of the 1984 Law that in Spain there is a State monopoly of a commercial character for the purposes of Article 37 of the Treaty because, under those provisions, the import and export of electricity are the subject of exclusive rights granted to the State corporation Redesa, through which the national authorities control intra-Community trade in electricity.

43 In reply, the Kingdom of Spain contends that the present action for a declaration that the exclusive rights in Spain to import and export electricity are contrary to Articles 30, 34 and 37 of the Treaty, and to Article 48 of the Act of Accession, is based in its entirety on a false assumption, since the provisions referred to by the Commission do not confer upon Redesa exclusive rights to import and export electricity. In particular, the defendant State makes the following submissions:

- The Royal Decree of 12 December 1924 laid down that the supply of electricity should be deemed a public service. The only consequence of this which is still in effect is that electricity tariffs are determined by the State authorities, as provided for by the Royal Decree. Furthermore, neither the generation nor the distribution of electricity was brought within the exclusive remit of the State. They are still activities carried on by numerous undertakings subject to a system of administrative authorization.

- The presence of a large number of electricity undertakings led to problems with regard to, inter alia, security of supply for consumers and the emergence of large surpluses the management of which increased the production cost. To resolve these problems, the 1984 Law classified the `unified operation of the national electricity system through high-voltage grids' (Article 1(1)) as a public service and assigned its management to a State corporation. According to the explanatory memorandum to the Law, to which the defendant State refers in detail, the legislature did not intend, in enacting that measure, to entrust to one State corporation all the activities which until then had been carried on by the private undertakings generating and distributing electricity. The intention was, without affecting the system of ownership of the latter or their freedom to use and manage their installations, only to establish a system whereby each and every one of them would interact with the State corporation in order that, through the introduction of unified criteria of economic efficiency and management of the generation and distribution cycle, it would be possible to ensure the best method of supply and the success of the energy policy of each Government.

- For the purpose of the `unified operation' system, various powers were conferred upon the abovementioned State corporation, including:

(1) the operation and maintenance of a high-voltage grid (transmitting electricity from the point of generation to the point of reception by distribution undertakings, which supply it, through low-voltage grids, to the final consumers), and the operation and maintenance of the parts of the high-voltage grid which permit connection with grids in other countries [Article 2(1)(e) of the 1984 Law];

(2) powers relating to international trading in electricity [Article 2(1)(i) of the same Law], by virtue of which Redesa, in the opinion of the Spanish Government, only has an opportunity to carry out transactions in this sector.

Those transactions may consist in imports and exports of electricity by Redesa itself, where this is considered conducive to ensuring supply or to reducing production costs of electricity at national level, or in the allocation, on grounds of national interest, of the precise share of each undertaking in international trade, and also in supervising the implementation of decisions in that area. According to the Spanish Government, Redesa's power to import and export electricity, if it sees fit, does not affect the right of private undertakings to do the same: their right can only be limited on `grounds of national interest', when the State corporation allocates the share of each undertaking in international trade in electricity. Nevertheless, the Spanish Government adds that an implied requirement, for private undertakings to be able to exercise such right, is that in each case fulfilment of the technical prerequisites must be verified so as to ensure that the electricity import or export transaction concerned (which can only be carried out through the international interconnection equipment of the high-voltage grid, for the operation of which Redesa is responsible under the 1984 Law) does not endanger the operation of the electricity system.

On the basis of those considerations, the Spanish Government claims that neither a literal nor a systematic interpretation of the provisions relied upon by the Commission can support the latter's contention that Redesa has exclusive rights to import and export electricity.

44 Indeed, I find the Commission's arguments on this point unconvincing.

45 The Commission's claim that Redesa has exclusive rights to import and export electricity, although there is no provision expressly conferring such rights upon the State corporation, is based mainly on the fact that, firstly, Redesa manages the `unified operation' of the national electricity system, which is described as a public service and, secondly, that it operates the country's high-voltage grid, including all the international connection facilities of the grid. However, I do not think that either of those factors sufficiently supports the conclusion that Redesa has exclusive rights to import and export electricity, having regard in particular to the defendant State's clarification of the exact meaning of the term `unified operation' and to the underlying objective of the 1984 Law.

46 As the Spanish Government points out (without being challenged by the Commission), exclusive rights to generate and distribute electricity did not exist in Spain before the 1984 Law was enacted, nor have they existed since then. The fact that the `unified operation' of the national electricity system was entrusted to Redesa can under no circumstances be construed as amounting to covert nationalization of the system as a whole or the grant to the State corporation of exclusive rights to carry on all the associated activities without exception, including importing and exporting electricity. (55)

47 Secondly, the fact that the operation and maintenance of the international connection facilities of the national transmission system were entrusted to Redesa alone is not sufficient to conclude necessarily that it was granted exclusive rights to import and export electricity, because the aforementioned task does not make it technically impossible for other undertakings to import and export electricity. (56) In addition, Article 2(1)(i) of the 1984 Law provides that Redesa may, subject to certain conditions, take steps to regulate the exact shares of the other undertakings in trade in international electricity which implies, without a shadow of doubt, that in principle they may engage in activities of that kind. (57)

48 To show the existence of the exclusive rights in question, the Commission also alleges that the Spanish Government has not cited a single specific case of a private undertaking which has imported or exported electricity to or from Spain and adds that, according to the information it has obtained, there is no undertaking, save Redesa, which imports or exports electricity. On that point, it seems to me sufficient to observe that the absence of information concerning imports or exports of electricity does not in itself justify the presumption that exclusive rights exist. (58)

Furthermore, if, with regard to the lack of information, the Commission is in reality alleging that, although there is no express provision in the 1984 Law granting Redesa exclusive rights to import and export electricity, in the present case the requirements for applying Article 37 of the Treaty are fulfilled because the State authorities are in a position, through the State corporation, to control de facto the intra-Community trade in question, the Commission's argument would be untenable even on that basis. I think that, to show de facto control by the Spanish authorities of imports and exports of electricity for the purposes of the second subparagraph of Article 37(1) of the Treaty, it is not sufficient for the Commission (which bears the burden of proof) to rely on the mere lack of information concerning trade in electricity: it would be necessary to adduce evidence to show at least that the relevant provisions of the 1984 Law have been used as a basis for measures (for example, the refusal of requests) by means of which undertakings other than Redesa have simply been prevented from importing or exporting electricity.

49 Finally, the Commission claims that the Spanish Government, in its reply to the reasoned opinion, stated that the Draft Law, which was then being debated (and which subsequently replaced the 1984 Law after the present action was brought: see footnote 54), expressly provided that undertakings other than Redesa could import and export electricity, subject to certain requirements and restrictions. The Commission's reasoning here seems to me to be particularly weak. The fact that a subsequent provision expressly confers a right to pursue an economic activity, at the same time laying down the requirements for that activity, does not justify the contrary inference that under the previous system that activity was entirely prohibited when, as in this case, that conclusion is not supported by other evidence.

50 In view of the foregoing, I consider that the Commission has not shown that in Spain there are exclusive rights to import and export electricity. Mainly on that ground, therefore, the application for a declaration that, by introducing such rights, the Kingdom of Spain has failed to fulfil its obligations under certain articles of the Treaty and Article 48 of the Act of Accession should be dismissed in its entirety. (59)

(cc) Do the rights at issue amount to discrimination between nationals of Member States regarding the conditions under which goods are procured and marketed?

51 For the reasons I have already given (see paragraph 24 et seq. above), I shall now consider whether the exclusive rights in question constitute quantitative restrictions or measures having equivalent effect to restrictions on imports (see section 1 below) and then whether such rights may be justified on the basis of Article 36 of the Treaty (see section 2 below).

(1) Do the contested rights constitute quantitative restrictions or measures having equivalent effect?

(i) Exclusive import rights

52 According to the Commission, the exclusive rights in the defendant States (60) to import electricity and (in the case of France) natural gas may create a barrier to trade in the Community and may therefore be measures having effects equivalent to quantitative restrictions on imports for the purpose of Article 30 of the Treaty because:

- they prevent producers in other Member States from selling electricity or natural gas to persons in the defendant States other than those vested with the contested rights, and

- they prevent undertakings in the defendant States (for example, distributors) and (in the case of Italy, France and Spain) consumers from choosing a supplier of electricity or natural gas who is established in another Member State.

53 I think there is firm support in the Court's case-law for the Commission's view.

54 The earliest of those cases is Manghera (cited in footnote 36). That judgment gave a preliminary ruling on certain questions, the first of which was whether, in connection with the `adjustment' of State monopolies of a commercial character, required by Article 37(1) of the Treaty, exclusive rights to import from other Member States should be abolished. The Court replied in the affirmative (paragraph 13), after observing that the object of Article 37(1) is to ensure compliance with the fundamental rule of the free movement of goods throughout the common market, `in particular by the abolition of quantitative restrictions and measures having equivalent effect in trade between Member States' (paragraph 9), that `this object would not be attained if, in a Member State where a commercial monopoly exists, the free movement of goods from other Member States similar to those goods with which the national monopoly is concerned were not ensured' (paragraph 10), and that, accordingly, an exclusive right to import manufactured goods granted to a monopoly of a commercial character constitutes, in respect of Community exporters, discrimination prohibited by Article 37(1) of the Treaty (paragraph 12). The sequence of steps in that reasoning leaves hardly any doubt, in my opinion, that an exclusive import right, in conjunction with a State monopoly of a commercial character, constitutes, according to the Manghera judgment, discrimination prohibited by Article 37(1), precisely because it is a measure having an effect equivalent to a quantitative restriction on imports. (61) In that connection it is noteworthy that, in his Opinion in Manghera, Advocate General Warner was in favour of construing Article 37 as requiring the abolition of exclusive import rights on the ground, inter alia, that it prohibits not only actual but also potential discrimination, which in his view made it necessary to interpret Article 37 in conformity with Dassonville (cited in footnote 44) with regard to the definition of `measure having equivalent effect'. (62)

55 If the precise meaning of the Manghera judgment is that exclusive import rights are measures having an effect equivalent to quantitative restrictions on imports, that assessment is by no means an isolated instance. On the contrary, it is in line with the Court's settled case-law that measures which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade include any national provision or practice which results in imports being channelled in such a way that only certain traders can carry them out, whereas others are prevented from doing so. (63)

56 Nevertheless, it could be argued that the conclusion reached by the Court in Manghera is connected with the fact that the holder of the exclusive right to import tobacco, which was the subject of the question before the Court, had also been given the exclusive right to manufacture the same product in the Member State in question. Therefore the adverse effect of the exclusive import right on trade in the Community was attributable, from that viewpoint, to the `natural' tendency of the holder of exclusive rights to promote trade in his own products rather than in imported products. I must say that this reading of the Manghera judgment is not supported by the wording of the judgment (no part of it appears to uphold the view that the Court's attitude would be different if the holder of the exclusive import right did not also possess the exclusive right of manufacture) or by the approach taken in the case-law cited in paragraph 55 relating to national measures restricting the category of persons who can import goods from other Member States.

57 In any case, in my opinion, there has been no justification for such doubts since the judgment in France v Commission. (64) The French Republic brought an action for the annulment of certain provisions of Commission Directive 88/301/EEC, (65) which was adopted under Article 90(3) of the Treaty. The provisions in question included Article 2 of the Directive, whereby Member States which have granted special or exclusive rights to undertakings for, inter alia, the import of telecommunications terminal equipment are to `ensure that those rights are withdrawn'. It is clear from the preamble to the directive that Article 2 was adopted because, according to the Commission, the retention of such rights would be inconsistent with, inter alia, Article 30 of the Treaty since it `can, and often does, lead to restrictions on imports from other Member States' (see the third recital in the preamble). France claimed that Article 2 should be annulled because, inter alia, the Commission had mistakenly taken the view that the exclusive rights referred to by Article 2 were contrary to the Treaty. The Court, taking as its starting point (paragraph 33) the classic formulation of the Dassonville judgment (cited in footnote 44 above), stated that, on the contrary, the Commission was right to consider exclusive import (and marketing) rights in the telecommunications terminal sector to be incompatible with Article 30 of the Treaty because such rights `are capable of restricting intra-Community trade' (paragraph 36). Among the reasons given by the Court was that the existence of such rights `deprives traders of the opportunity of having their products purchased by consumers' (paragraph 34), and that, because of the diversity and technical nature of the products concerned, `there is no certainty that the holder of the monopoly can offer the entire range of models available on the market, inform customers about the state and operation of all the terminals and guarantee their quality' (paragraph 35). The Court thus recognized that the exclusive rights in question (which included exclusive import rights) restricted intra-Community trade, without taking any account of the fact that the holders of the exclusive rights in question also manufactured the products concerned. For the Court, it was sufficient that, on the supply side, such rights prevent traders from offering their products to all consumers without exception and, on the demand side, such rights deny consumers access to the full range of products available on the market in question.

58 In view of that case-law, the exclusive rights to import electricity and natural gas to which the present actions refer must (leaving aside the fact that the bodies to which they were granted are also the producers of the products in question) (66) be regarded as measures having equivalent effect to quantitative restrictions on imports. By depriving producers and distributors of the opportunity to offer the aforementioned products to all potential customers in the defendant States and by preventing those potential customers (simply the other side of the coin) from obtaining the products in question from the undertaking of their choice, such rights may adversely affect trade in the Community by restricting the category of persons who can take part in that trade.

59 To counter that conclusion, the defendant States contend, firstly, that the exclusive rights in question do not fall within the ambit of Article 30 of the Treaty because they do not have the object or effect of discriminating between imported products and domestic products, since exactly the same commercial conditions (method of transmission and distribution, prices, etc.) apply to imported as to domestic electricity and natural gas. The Italian, French and Spanish Governments consider, in particular, that in order to determine whether a national measure falls within the scope of Article 30 of the Treaty, the question whether the measure pursues the object of creating discrimination, or may by other means create it, has become a criterion of the greatest importance, in the wake of Keck and Mithouard, (67) according to which the application of national provisions restricting or prohibiting certain selling arrangements cannot hinder trade in the Community `so long as those provisions apply to all relevant traders operating within the national territory and so long as they affect in the same manner, in law and in fact, the marketing of domestic products and of those from other Member States'.

60 The paragraph cited from Keck and Mithouard concludes a line of reasoning which starts (paragraph 11) with the observation in Dassonville (cited in footnote 44) that any measure which is capable of directly or indirectly, actually or potentially, hindering intra-Community trade constitutes a measure having equivalent effect to a quantitative restriction. On that basis, the Court, ruling on certain national legislation imposing a general prohibition on resale at a loss, stated first (paragraph 12) that such legislation `is not designed to regulate trade in goods between Member States' and then added (paragraph 15) that, as established by the case law beginning with Rewe-Zentral (`Cassis de Dijon', cited in footnote 40 above), national rules laying down requirements to be met by goods coming from other Member States are measures having equivalent effect, prohibited in principle by Article 30, even if such rules apply without distinction to all products. Finally, the Court stated that, provided the conditions set out in paragraph 15 of the judgment were fulfilled, the application to products from other Member States of national provisions restricting or prohibiting certain selling arrangements is not such as to hinder directly or indirectly, actually or potentially, trade between Member States within the meaning of Dassonville. From that reasoning the French Government infers that (a) only two types of national measure (namely those relating to requirements to be met by imported products and those prohibiting or restricting certain selling arrangements) can raise the question of applying Article 30 of the Treaty, and (b) if the exclusive import rights in question can under no circumstances be regarded as coming within the first category of national measures, the question whether they are measures having equivalent effect must be examined in the light of the criteria set out by the Court in Keck and Mithouard concerning provisions prohibiting or restricting certain selling arrangements. Therefore, if they apply in the same way to all traders and affect the marketing of imported and domestic products in the same manner, they must be deemed consistent with Article 30 of the Treaty.

61 That argument cannot succeed, firstly because it overlooks the fact that Keck and Mithouard itself (paragraph 12) clearly shows that there is another type of national measure which may be described as a measure having equivalent effect, namely measures designed to regulate trade in goods between Member States. The criteria for determining whether or not such measures fall within the scope of Article 30 are not affected in any way by the Court's observations as to whether national provisions prohibiting or restricting certain selling arrangements are covered by Article 30. Although the Court took the view, for the reasons given in paragraph 17 of Keck and Mithouard, that provisions of the latter kind cannot in principle impede trade in the Community, the question remains open as regards national measures relating directly to intra-Community trade and it must be assessed on each occasion, even after Keck and Mithouard, solely by reference to the definition of measures having equivalent effect, as formulated in Dassonville. (68) Since the exclusive import rights in question relate directly to the conditions and requirements for the foreign trade of the defendant States and are measures `designed to regulate trade in goods between Member States', the fact that they may (for the reasons given in point 58), at least potentially, have an adverse effect on intra-Community trade is sufficient to justify regarding them as measures having equivalent effect to restrictions on imports, and it is not necessary to compare the circumstances under which trade is carried on in the imported products and in the domestic products, as the defendant States have argued without justification.

62 There is likewise no foundation for the claim (raised, with certain variations, by all the defendant States) that the exclusive rights in question to import electricity do not restrict intra-Community trade in that sector because the bodies vested with the rights, being under an obligation to ensure the supply of electricity under the best possible economic conditions, import electricity whenever the need to do so is apparent from a comparison of the prices offered by foreign producers or distributors with the production cost of domestic electricity. Although the holder of the exclusive right may import electricity when the prices offered are deemed favourable, that fact is not sufficient to neutralize the potential restrictive effect of that right when no other operator or consumer (69) can make direct contact with operators in other Member States in order to decide, by reference to his own needs and capacity, whether it would be advantageous to import electricity.

63 The fact that this cannot be done also invalidates the claims that the exclusive import rights do not in practice affect the amounts of electricity and natural gas imported into the defendant States. Even if, as the Netherlands Government alleges, in 1993 15% of the total demand for electricity in the Netherlands was covered by imports; even if, as the Italian Government alleges, Italy is the country which imports the largest amount of electricity in Europe, and even if, as the French Government claims, France is necessarily a large importer of natural gas because domestic production is insufficient, those circumstances do not change the important fact that exclusive import rights are of such a nature as to affect imports which could otherwise take place. (70)

64 The Italian Government also contends that, as the Court observed in ERT (cited in footnote 27), in order for an exclusive right to import a product the movement of which is closely connected with the supply of a service to fall within the ambit of Article 30 of the Treaty, it is not sufficient to show that it may restrict intra-Community trade within the meaning of Dassonville, but it must also be shown that it results in discrimination between imported and domestic products. According to the Italian Government, that is precisely the effect of the exclusive right to import electricity because, even assuming that electricity may be regarded as a `good' (which the Italian Government does not accept: see point 12 et seq. of this Opinion), it is any case a good the marketing of which depends so directly on the manner of transmission that, ultimately, it is inseparable from the service supplied. The French Government argues along similar lines, taking the view that an exclusive right to import electricity is inherent in an exclusive right to transmit it.

65 Does the ERT judgment have the implications attributed to it by the Italian and the French Governments? It finds, firstly (paragraph 12), that Community law does not prevent the granting, as such, of a television monopoly for considerations relating to the public interest, although the manner in which the monopoly is organized or exercised must not infringe the rules of the Treaty. On the question whether a television monopoly is contrary to the provisions of the Treaty relating to the free movement of goods, the Court held, as I have already said (paragraph 16), that the grant of an exclusive right to import (hire or distribute) material and products necessary for exercising the exclusive right to supply a television broadcasting service does not constitute a measure having an effect equivalent to a quantitative restriction unless the grant of those rights `resulted, directly or indirectly, in discrimination between domestic products and imported products to the detriment of the latter' (see paragraphs 15 and 16 of the judgment). In my view, what the ERT judgment really means is that granting to the holder of an exclusive right to supply a service (which is not in itself contrary to Community law) an exclusive right to import goods necessary for that service is not, in principle, a measure which can have an adverse effect on the trade of the State in question with other Member States because in any case the activity for which those products must be imported is carried on by only one person (and, I repeat, without infringing Community law). In that case, the question of an infringement of Article 30 of the Treaty would only arise if, under the cover of the `necessary' monopoly of imports, as described above, there was concealed discrimination in favour of domestic products. However, in Italy and France the context of the exclusive right to import electricity is entirely different. The electricity imported by the undertakings holding exclusive rights is certainly not intended for their consumption alone, but is intended for all undertakings and consumers in the Member State in question. Therefore the special conditions which, in principle, result in the exclusive right of importation referred to in the ERT judgment not endangering intra-Community trade are not fulfilled. By excluding contact between operators in other Member States and their numerous potential customers in Italy and France, the exclusive right to import electricity may, as I have said repeatedly, restrict the volume of intra-Community trade in electricity. This last observation justifies classifying those rights as measures having an effect equivalent to quantitative restrictions on imports (71) and therefore the counter-arguments of the Italian and French Governments, which seek to rely on the ERT judgment and the close connection between the exclusive rights to import electricity and the terms of transmission within the country, are unfounded. (72)

(ii) Exclusive export rights

66 Are the other measures to which the present applications refer, namely exclusive export rights, (73) measures having an effect equivalent to quantitative restrictions on exports for the purposes of Article 34 of the Treaty?

67 In my opinion, the case-law on that provision of the Treaty shows that the Court distinguishes between:

- measures which directly impose a prohibition or quantitative restriction on exports: such measures, as quantitative restrictions in the strict sense, are undoubtedly regarded as contrary to Article 34; (74)

- measures which refer directly to conditions and requirements for exports, without expressly imposing quantitative restrictions: although the judgments concerning their compatibility with the Treaty do not set out a general criterion on this point, I think it may easily be inferred from the decided cases as a whole that such measures are regarded as having an effect equivalent to quantitative restrictions, prohibited by Article 34, if they are deemed to be capable, even if only potentially, of impeding intra-Community trade; (75)

- measures which do not refer directly to the export trade of the Member State in question: these may be considered to have an effect equivalent to quantitative restrictions on exports only where it is shown that they are `national measures which have as their specific object or effect the restriction of patterns of exports and thereby the establishment of a difference in treatment between the domestic trade of a Member State and its export trade in such a way as to provide a particular advantage for national production or for the domestic market of the State in question'. (76) Thus, national provisions which, while appearing to apply without differentiation to products for export and those for the domestic market, establish implicit prohibitions or restrictions on exports have been declared contrary to Article 34 of the Treaty. (77)

68 The exclusive rights at issue, which refer directly to the conditions for exporting electricity and gas, clearly belong to the second of the abovementioned categories. Therefore the question whether such rights are compatible with Article 34 of the Treaty must be answered in conformity with the reasoning of the judgments cited in footnote 75 and not, as the Commission appears to suggest, the line of cases starting with Groenveld (cited in footnote 76) which, I repeat, in my view refer to national measures which do not relate directly to the export trade. Therefore, where it is shown that the contested measures, which grant export rights to only one organization, prevent operators or consumers in other Member States from contacting other entities in order to obtain supplies, in my opinion such measures, which may, at least potentially, adversely affect intra-Community trade, may justly be regarded as having an effect equivalent to quantitative restrictions on exports for the purposes of Article 34 of the Treaty, (78) and it is not necessary, as the Spanish Government seems to argue, to examine in addition the conditions under which trade in the products concerned takes place within the defendant States. Secondly, I cannot accept the Italian Government's argument that, as Italy has an electricity shortage, ENEL's exclusive right to export does not in practice affect Italian exports. The rights at issue fall within the ambit of Article 34 if it is shown that they may impede trade in the Community, and it is unnecessary to prove that they actually restrict exports. (79) Finally, for the same reason the French Government's submissions that the export of electricity, which began in 1981, amounted in 1993 to approximately 12% of national production, and that French production of natural gas is in any case negligible and in constant decline, are irrelevant. Furthermore, the French Government itself states that the electricity and natural gas produced in France are primarily intended for consumers in that country, for which reason - and also because EDF and GDF, the undertakings with exclusive rights, have an obligation to provide an uninterrupted supply of electricity and gas - `it is possible that the principle laid down in Article 34 of the Treaty is not observed in every case'.

(2) The contested rights may be justified under Article 36 of the Treaty

69 The defendant States contend that, assuming that the exclusive rights in question are measures having an effect equivalent to quantitative restrictions on imports and exports, they are nevertheless justified under Article 36 and are therefore compatible with the Treaty. The arguments they put forward reflect, of course, the conditions prevailing in each country, but they all centre around the idea that the contested rights are justified on grounds of `public security' for the purposes of Article 36 of the Treaty, as their purpose is to ensure the supply of electricity and natural gas in all the defendant States.

70 These arguments are no doubt based on Campus Oil. (80) In that case the High Court of Ireland requested a preliminary ruling on various questions relating to the interpretation of Articles 30, 31 and 36 of the Treaty in order to ascertain whether national provisions requiring importers of petroleum products to obtain their supplies, up to a certain percentage, from a State corporation operating a refinery in Ireland, at prices fixed by the competent Ministry, were compatible with the Treaty. After finding that the national rules constituted a measure having an effect equivalent to a quantitative restriction on imports (paragraph 20), the Court went on to consider whether the reasons for the rules constituted grounds of `public security' for the purposes of Article 36 of the Treaty. The Court accepted (paragraph 34) that `petroleum products ... are of fundamental importance for a country's existence since not only its economy but above all its institutions, its essential public services and even the survival of its inhabitants depend on them', and `an interruption of supplies of petroleum products, with the resultant dangers for the country's existence, could therefore seriously affect the public security that Article 36 allows States to protect'. The Court added (paragraph 35): `It is true that ... Article 36 refers to matters of a non-economic nature. A Member State cannot be allowed to avoid the effects of measures provided for in the Treaty by pleading the economic difficulties caused by the elimination of barriers to intra-Community trade. However, in the light of the seriousness of the consequences that an interruption in supplies of petroleum products may have for a country's existence, the aim of ensuring a minimum supply of petroleum products at all times is to be regarded as transcending purely economic considerations and thus as capable of constituting an objective covered by the concept of public security.'

71 There can be no doubt that the observations underlying the paragraphs cited above from Campus Oil apply equally to electricity. A modern State or economy could not conceivably function without a continuous, uninterrupted supply of electricity, which is also essential for meeting the basic daily needs of the population. Although less obviously, natural gas is of similar importance in the functioning of the State, society and the economy, at least in France, the only Member State which has introduced exclusive rights to import and export natural gas. It appears from France's defence that in 1990 13% of that country's primary energy requirements was met by natural gas. Apart from the fact that, as is also indicated in the defence, experts agree that in the next 20 years the consumption of natural gas will rise by up to 50%, the mere fact that natural gas is already being used in France as a primary energy source in the abovementioned proportion justifies, in my opinion, regarding security of the supply of natural gas as an objective covered by the concept of public security within the meaning of Article 36 of the Treaty.

72 The Commission is in no doubt that, in view of the Campus Oil judgment, the security of electricity supply is a ground of public security for the purpose of Article 36. Nevertheless, it observes that the Court has not given an exact definition of `security of supply' and states that, with regard to electricity, the term comprises three elements, none of which can be affected by the abolition of the contested exclusive rights. According to the Commission, those three elements are the security of supply of the raw materials necessary for the production of electricity, a guarantee of sufficient quantities of electricity to meet demand and, finally, the security of the transmission system.

73 On the last point, the Commission contends, in particular, that the abolition of exclusive rights to import and export electricity is perfectly compatible with the establishment and maintenance of centralized control of the transmission system so as to ensure that supply exactly matches demand at all times and to avoid the technical problems which an imbalance might cause in the functioning of the system, and is also compatible with the establishment of technical standards with which the users of the system must comply to ensure the quality of the supply. The defendant States for their part have not specifically argued that the exclusive rights in question are absolutely necessary for the security of the transmission system. It is also significant that, as already mentioned (see footnote 56), in the Amended Proposal for a directive concerning common rules for the internal market in electricity (cited in paragraph 4), the provisions concerning access for producers and distributors to the distribution system coexist with those concerning the `transmission system operator' who will be responsible for managing energy flows on the system and will therefore retain the right to refuse requests for access to the system if certain requirements are not fulfilled.

74 Therefore the real disagreement between the Commission and the Member States turns on the question whether the abolition of the exclusive rights may adversely affect the supply of the raw materials necessary for the production of electricity or jeopardize the guaranteed supply of the necessary quantities needed to satisfy demand at any time.

75 On this point the Kingdom of the Netherlands makes the following submissions:

- To ensure that in the short and medium term the quantities of electricity available in the Netherlands exactly match demand, the EW Law cited above (paragraph 29 et seq.) lays down a planning system at national level for the generation of electricity. Every two years SEP (which owns the exclusive right to import electricity for public distribution), in conjunction with the electricity generation undertakings and the body representing distribution undertakings, draws up an electricity plan (`E-plan') which specifies the production capacity necessary to meet the overall demand forecast for the next ten years in the Netherlands. The E-plan, which is approved by the Minister for the Economy, imposes certain obligations on the generation and distribution undertakings, the fulfilment of which may be enforced through the courts. For example, generation undertakings must construct the new generation units provided for by the E-plan and keep them in operation. However, the main obligation of each generation undertaking is to supply the distribution undertaking in its region with all the electricity it requests, while each distribution undertaking in turn must in principle supply all the electricity demanded by consumers in the area which it serves. Consequently there is close interdependence between the E-plan and the mutual obligations described above. The distribution undertakings can only be required to supply electricity to consumers if the quantities produced by the generation undertakings are sufficient. Moreover, in compensation for the obligation to meet in full the demand from the distribution undertakings, the generation undertakings must be given guarantees with regard to absorption of the quantities generated as a whole.

- According to the Kingdom of the Netherlands, the question whether the exclusive right to import electricity for public consumption is justified under Article 36 of the Treaty (81) must be assessed by reference to the system described above in its entirety, and to the risks entailed in generating more electricity than can be absorbed. The unrestricted import of large volumes of electricity by the distribution undertakings would lead to large surpluses, which would result in an economic burden for the generators so great that it would dang