Opinion of Mr Advocate General Lenz delivered on 13 January 1988. - Commission of the European Communities v Hellenic Republic. - Obstacles to cereal imports. - Case 240/86.



European Court reports 1988 Page 01835



Opinion of the Advocate-General

++++

Mr President,

Members of the Court,

A - Facts

1 . In this case the Commission seeks a declaration that by impeding and at times even wholly preventing cereal imports between February 1984 and April 1986 the Greek Government failed to fulfil its obligations under the Treaty . It is further alleged that by failing to communicate information requested of it the Greek Government failed to fulfil its obligation to cooperate under Article 5 of the EEC Treaty

2 . All imports into the Hellenic Republic were and still are subject to a system of foreign currency permits . That general regulation is not the subject-matter of this action but is being dealt with by the Commission separately .

3 . Decision No E 6/885 of 16 February 1984 of the Minister for Commerce to the Bank of Greece made all wheat imports subject to the approval of an Import Regulation Committee attached to the Bank of Greece ( hereinafter referred to as "the Committee "). A further Ministerial Decision of 21 February 1984 ( No E 6/963 ) stated that import permits for wheat granted before 16 February 1984 could not be used since the goods had not undergone the required procedure . The importers were therefore informed that they must submit new applications for import permits to the Committee . This procedure of obtaining approval from the Committee was only discontinued following a Ministerial Decision of 23 April 1986 ( No E 6/4492 ).

4 . Upon becoming aware of these import barriers the applicant, on 5 October 1984, sent a letter of formal notice to the Greek Government ( Annex 3 to the application ); on 25 November 1985 it delivered a reasoned opinion ( Annex 7 to the application ) in which it laid down a one month time-period for the removal of the import barriers . In its answer of 7 March 1986 the defendant contended that it was entitled to adopt the disputed measures .

5 . Meanwhile further barriers were introduced, inasmuch as a decision of the Ministry of Commerce of 25 July 1985 ( No E 6/2871 ) cancelled all import permits which had been granted but had not yet been used . Imports for re-exportation with an added value of 30% were exempted from the centralized approval procedure of the Committee . Security was levied to ensure compliance with the procedure . This procedure was the subject of a letter of formal notice sent on 20 November 1985 and a reasoned opinion delivered on 15 May 1986 .

6 . The two procedures were combined in the application made in September 1986 for a declaration that by requiring foreign currency permits for imports of cereals and making such permits subject to an obligation to re-export the products, by revoking permits already granted and by failing to communicate to the Commission the information and regulations requested by it the defendant had failed to fulfil its obligations under Articles 5, 30, and 106 ( 1 ) of the EEC Treaty and under Council Regulation ( EEC ) No 2727/75 on the common organization of the market in cereals .

B - Opinion

I - Admissibility

7 . The Government of the Hellenic Republic has raised an objection of inadmissibility, arguing that the action is devoid of purpose since all the alleged infringements had been discontinued by the time the application was lodged in September 1986 .

8 . Since the purpose of an action against a Member State for failure to fulfil its obligations under Community law is to induce that State to comply with the Treaty, there is some doubt as to whether an application is admissible where the conduct complained of has already been discontinued . However, it follows from the wording of the second paragraph of Article 169 of the EEC Treaty that an action may be brought before the Court of Justice if the alleged breach of the Treaty is not discontinued within the period laid down in the reasoned opinion .

9 . In principle, therefore, as I pointed out in my opinion in Case 103/84, ( 1 ) even breaches of the Treaty committed in the past and no longer in existence may be the subject of proceedings for a declaration that a Member State has failed to fulfil its obligations . This possibility cannot in general be excluded since otherwise, in view of the length of the pre-litigation procedure, it would in many cases be impossible for the Court to exercise its jurisdiction with regard to breaches of the Treaty of short duration . Since the duration of conduct which is contrary to the Treaty is no indication of the gravity of the infringement it must be possible to bring proceedings even in relation to a breach of the Treaty which is limited in time . This is particularly true inasmuch as measures dictated by seasonal requirements, for example, apply by their very nature only during a specific period and derive their effectiveness precisely from that fact .

10 . The most important issue in determining whether an application is admissible is whether or not the Member State concerned has adopted the measures required of it within the period laid down in the reasoned opinion .

11 . Having regard to that criterion, a distinction must be drawn between the two preliminary procedures which together have resulted in this application . The first reasoned opinion, which laid down a period of one month for compliance, was delivered on 25 November 1985 . The defendant reacted only in March of the following year, and sought to justify the disputed measures . The disputed regulations were repealed only by a decision of 23 April 1986, of which the applicant was not informed . That, moreover, also explains why the applicant sent a second reasoned opinion on 15 May 1986, although the disputed measures had been discontinued on 23 April 1986 and that document was therefore devoid of purpose even though the applicant had not been informed of the discontinuation of the measures and remained ignorant of it . That, in my opinion, follows from the second paragraph of Article 169 .

12 . Since the judgment in Case 26/69, ( 2 ) the Court has considered it necessary that an interest in bringing the proceedings should be established when the alleged failure to fulfil obligations under the Treaty was virtually at an end before the commencement of the proceedings . It has subsequently repeated this requirement a number of times . ( 3 ) However, the Court has held in the later cases ( 4 ) that an interest in bringing proceedings exists once the judgment may establish a basis for the responsibility that a Member State can incur as regards other Member States, the Community or individuals, and it is not necessary to specify the precise circumstances of a claim or the person who may bring a claim . In the judgment in Case 103/84, ( 5 ) there is no reference to the judgment' s being a potential basis for liability . The Court simply affirms the interest in bringing the action, pointing out that the default at issue was not remedied until after the period laid down pursuant to the second paragraph of Article 169 had elapsed .

13 . In my view, therefore, it is not necessary to have regard to other factors, since in this case a judgment declaring that there has been a breach of the Treaty may certainly constitute a basis for liability with regard to Member States, the Community or individuals . Even if the Court were to depart from its previous case-law and require additional criteria, it must be held that they are also present . That follows from the nature of the disputed measures, which are temporary restrictions on or barriers to imports of wheat which may be pitched to market conditions in the Member State concerned . The temporary introduction of additional control and administrative procedures can, at the least, give rise to delays which are incompatible with the principle of the free movement of goods and a common organization of the market which is governed solely by Community instruments . If an element of protectionism is concealed in the additional authorization requirements it follows that there is a danger of their being repeated . They would therefore be most effective if they were applied for short periods .

14 . The application is therefore admissible in relation to the subject-matter of the dispute as defined in the first reasoned opinion . However, the application is inadmissible as regards the subject-matter of the dispute introduced in the second reasoned opinion since it had already become devoid of purpose when that reasoned opinion was delivered .

II - Substance

15 . The subject-matter of the dispute is defined by the first reasoned opinion delivered on 25 November 1985 . The following complaints therefore fall to be examined on the merits :

1 . Breach of the principle of free movement of goods ( Article 30 of the EEC Treaty, Council Regulation No 2727/75, Article 65 ( 1 ) of the Act of Accession of the Hellenic Republic )

16 . First of all, the applicant complains that the foreign currency permit procedure was made more difficult by the introduction of the requirement that the consent of the Bank of Greece must be obtained for every permit granted in the cereals sector . In its view, this entailed the introduction of a two-stage check which delayed and at times even prevented wheat imports, since the Bank of Greece gave its consent belatedly or not at all . Since trade in wheat has been completely liberalized this conduct constitutes a breach of Articles 30 and 106 ( 1 ) of the EEC Treaty in conjunction with Regulation No 2727/75 and Article 65 of the Greek Act of Accession .

17 . In order to ensure the free movement of goods Article 30 of the EEC Treaty prohibits all measures having equivalent effect to quantitative restrictions on imports . It is well established in the case-law of the Court that "all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade" are measures having an effect equivalent to quantitative restrictions . ( 6 )

18 . As regards intra-Community trade in cereals Council Regulation No 2727/75 of 29 October 1975 ( 7 ) established a common organization of the market . Article 21 of the regulation sets out the conditions under which goods covered by the common organization of the market are not admitted to free circulation . It follows, a contrario, that otherwise all goods covered by the organization of the market may circulate freely within the Community . Only the Community rules concerning the organization of the market may restrict such movement .

19 . Since then, the Court has held several times that once the Community has, pursuant to Article 40 of the EEC Treaty, adopted legislation establishing a common organization of the market in a given sector Member States are under an obligation to refrain from taking any measure which might undermine or create exceptions to it . ( 8 ) It must be inferred from this case-law that the common organizations of the markets are based on the concept of an open market to which every producer has free access and whose functioning is regulated solely by the instruments provided for by that organization . ( 9 )

20 . This legal position was fully applicable to the circumstances of the Hellenic Republic from February 1984 to April 1986 since under Article 65 ( 1 ) of the Greek Act of Accession the Community rules concerning inter alia quantitative restrictions and measures having equivalent effect have been applicable since 1 January 1981 to all products covered by a common organization of the markets at the time of Greece' s accession . It is not disputed that at that time the common organization of the market in cereals was in existence, so there is no possibility of derogation .

21 . The defendant has therefore failed to fulfil its obligations under Community law if the introduction of a centralized system of permits for cereal imports constitutes a quantitative restriction on imports or a measure having equivalent effect . It must be stated at the outset that the introduction of a control mechanism in the form of an administrative procedure for imports of goods is of itself potentially capable of hindering trade . The need to submit applications and to tolerate delays in the granting of an import permit of itself undermines the free movement of goods .

22 . It should be observed that trade was in fact impeded, since the applicant became aware of the procedure through complaints by persons affected, and that further adverse effects on trade were brought to its attention after it had first made contact with the defendant .

23 . The defendant has not denied that certain restrictions arose ( 10 ) but during both the preliminary procedure and the proceedings before the Court it put forward the view that it was entitled to adopt the disputed measures since at the beginning of 1984 there had been an increase in breaches of national exchange control law and it was necessary to take appropriate measures against capital flight .

24 . It is true that in connection with the liberalization of payments provided for in Article 106 of the EEC Treaty the Court had held that Member States may impose controls in order to verify whether certain transfers of capital are in fact liberalized transfers or disguised movements of capital which have not been liberalized . ( 11 ) Within these limits Member States may impose controls on transfers of currency . They are also at liberty to take appropriate measures against capital flight or similar speculation against their currency .

25 . However, it is extremely debatable whether the disputed measures may be justified in those terms . Apart from a general assertion that the controls were necessary because of breaches of the exchange control legislation and increased capital flight, the defendant has not provided a detailed explanation why the rules were necessary .

26 . What is more important, however, is that although the procedure for obtaining approval by the Bank of Greece is ostensibly incorporated in the foreign currency permit procedure, the wording of the decisions ( E 6/885; E 6/963 ) - which were only communicated after a request by the Court - confirms the applicant' s view that it amounts to an additional control mechanism . The decisions themselves indicate that applications were to be submitted to the Import Regulation Committee, without whose approval no import licences could be issued .

27 . Although that committee was located at the Bank of Greece the purpose of the procedure was not to control currency outflows but to regulate imports of goods . This much is indicated both by the wording of the decisions and by the arguments put forward by the defendant in the course of the proceedings before the Court . Thus, for example, the defendant stated that the centralized procedure had become necessary in order to ascertain patterns of trade in the cereal sector . It maintained that the permit procedure was justified by the need to obtain information on stock requirements and to examine cereal requirements . However, these arguments do not provide additional grounds for justifying an actual or even a potential restriction on trade .

28 . The fact that the applicant did not expressly complain about the Import Regulation Committee' s approval procedure but instead directed its attention to restrictions arising in the context of the foreign currency permit procedure is no objection since the defendant government persistently refused to communicate the relevant texts and consequently the applicant only became aware of the restrictive practices because of their actual effect .

29 . Since the centralized authorization procedure constituted regulation of wheat imports I consider that it was a breach of the principle of the free movement of goods, and it is not necessary to have recourse to the principle of the freedom of payments established in Article 106 of the EEC Treaty .

30 . However, if the Court should take the view that Article 106 of the EEC Treaty is relevant, because the import permit procedure is only apparently incorporated in the foreign currency permit procedure or on substantive grounds, then the disputed measures are still impermissible .

31 . The freedom to make payments must be regarded as a necessary concomitant of the free movement of goods, services, capital and persons . To the extent that these basic freedoms are achieved, the requisite payments must be allowed . Since free movement of goods in the cereal sector has been fully achieved no new restrictions on payments relating to such goods may be introduced .

32 . The defendant' s reliance, in particular, on Articles 67 and 68 of the EEC Treaty and Article 5 of the directive implementing Article 67 is irrelevant since the foreign currency permit procedure ( in so far as it constitutes the subject-matter of the dispute ) does not concern the free movement of capital, which has not yet been fully achieved .

33 . As I have already indicated, the Committee' s approval procedure exceeds the bounds of permissible exchange control . Other measures, interfering less with the free movement of goods, could have been taken to prevent breaches of the exchange control legislation, in particular capital flight or other speculation . In any event, the general procedure for obtaining a foreign currency permit, the legality of which has not yet been conclusively determined, would have been sufficient . The centralized import permit procedure therefore constitutes an infringement of the Treaty in relation to the principle of the free movement of goods .

34 . The revocation of previously issued import permits which took place when the centralized procedure was introduced ( 12 ) must be considered to be incompatible with the Treaty, since it represents an increased restriction on imports . There is no discernible reason why importers could not make use of a permit which had already been granted and were instead obliged to make a fresh application if the purpose of this procedure was not to regulate the actual amount of imports .

2 . Breach of the obligation to cooperate contained in Article 5

35 . The applicant also alleges that the defendant failed to fulfil its obligations under Article 5 of the EEC Treaty inasmuch as it failed to reply to the applicant' s two telexes of 12 and 15 March 1984 in which its attention was drawn to the fact that a system of import licences was contrary to Community law .

36 . In a letter of 13 February 1985 the Commission' s Director-General for Agriculture requested the defendant to communicate the text of the regulations and a list of applications and information relating the latter to cereal imports . The applicant requested more detailed information concerning the length of time which the procedure took . The only reply which the defendant gave to these requests for information was to send a list of the permits granted during the first six months of 1984 .

37 . Finally, in view of the obdurate conduct of the defendant the applicant sent a further telex on 23 October 1985, which received no reply whatsoever .

38 . The first paragraph of Article 5 of the EEC Treaty lays down the Member States' duty to cooperate as a general principle . That provision can be relied on when no provisions of the Treaty expressly define the obligations of the Member States . By signing the Treaty the Member States bound themselves to act in conformity with it . The purpose of the pre-litigation procedure in actions for failure to fulfil obligations is to enable disputes to be settled without Court proceedings, which implies that the Member State in question has an obligation to cooperate . Without active cooperation it cannot be determined whether a breach of the Treaty has been committed, nor, a fortiori, can such a breach be eliminated .

39 . The purpose of the applicant' s first telexes was to define the subject-matter of the dispute . The applicant enquired whether the information which it had received concerning the practice of issuing import licences in the guise of foreign currency permits was accurate . It pointed out that such a practice might involve measures equivalent in effect to quantitative restrictions on imports, contrary to the Treaty . Finally it asked for an answer within a prescribed period . There was no response to either telex . This refusal to respond to the applicant' s request for information must of itself be regarded as a failure to fulfil the obligation to cooperate .

40 . When the applicant made further efforts to clarify the situation and, to this end, requested the defendant to send it the ministerial decisions and statistics relating to foreign currency permits applied for and actually granted, the Greek Government simply sent a list of the permits granted in the first half of 1984 . This conduct was not calculated to cast light on the circumstances . On the contrary, it served to obscure the nature of the procedure since it gave no indication as to the number of applications or the date on which they were made . It was impossible to obtain a realistic picture of the disputed procedure on the basis of the lists which were provided .

41 . In the course of the proceedings before the Court the defendant stated that it had no reliable comprehensive data on the applications which had actually been made for the period when foreign currency permits were handled by the approximately 3 000 banks . For that reason, it claimed, centralization had become necessary .

42 . Even if these claims were justified it would still have been the defendant' s duty at least to inform the applicant of those circumstances and to explain them . The continued indifference which the defendant displayed with regard to the telex of 23 October 1985, which once again referred to conduct in breach of the Treaty, also suggests a lack of willingness to cooperate .

43 . The defendant has thus failed to fulfil its obligations provided in the Treaty and made specific by the applicant' s requests .

44 . The obligation to cooperate which is set out in the second sentence of the first paragraph of Article 5 of the EEC Treaty may be defined as an obligation to provide assistance to the institutions . Not only, therefore, has the defendant failed to fulfil its primary obligation under the Treaty to act in conformity therewith, it has also failed to fulfil its obligations with regard to the applicant in the carrying out of the latter' s duties under Article 155 of the EEC Treaty .

3 . Costs

45 . As regards costs, it must be borne in mind that the part of the application based on the second pre-litigation procedure is inadmissible because the defendant had already desisted from the disputed conduct when the reasoned opinion was delivered . However, that is largely attributable to the defendant' s uncooperative attitude . Had it informed the applicant about the state of the procedure, as it was invited to do a number of times, the second reasoned opinion would certainly never have been delivered . As late as March 1986 the defendant wrote to the plaintiff putting forward the view that it was entitled to adopt the disputed measures . It also considered it unnecessary to inform the applicant that the measures had been repealed . In the light of all the foregoing I consider it appropriate that the defendant should be ordered to pay the costs pursuant to Article 69 ( 3 ) of the Rules of Procedure .

C - Conclusion

46 . I therefore propose that the Court should rule as follows :

( 1 ) By making cereal imports subject, from February 1984 to April 1986, to a centralized import licence procedure administered by the Bank of Greece' s Import Regulation Committee the defendant has failed to fulfil its obligations under Article 30 of the EEC Treaty in conjunction with Council Regulation No 2727/75 and Article 65 of the Act of Accession of the Hellenic Republic .

( 2 ) The defendant has failed to fulfil its obligations under the first paragraph of Article 5 of the EEC Treaty by consistently failing to cooperate with the applicant .

( 3 ) The remainder of the application should be dismissed as inadmissible .

( 4 ) The defendant should be ordered to pay the costs .

(*) Translated from the German .

( 1 ) Opinion of Mr Advocate General Lenz of 28 January 1986 in Case 103/84 Commission v Italian Republic (( 1986 )) ECR 1759 .

( 2 ) Judgment of 9 July 1970 in Case 26/69 Commission v French Republic (( 1970 )) ECR 565 .

( 3 ) See the judgment of 7 February 1973 in Case 39/72 Commission v Italian Republic (( 1973 )) ECR 101; judgment of 5 June 1986 in Case 103/84 Commission v Italian Republic (( 1986 )) ECR 1759; judgment of 20 February 1986 in Case 309/84 Commission v Italian Republic (( 1986 )) ECR 599; judgment of 17 June 1987 in Case 154/85 Commission v Italian Republic (( 1987 )) ECR 2717 .

( 4 ) See the judgments cited above .

( 5 ) At paragraph 8 of the judgment .

( 6 ) See the judgment of 11 July 1974 in Case 8/74 Procureur du Roi v Dassonville (( 1974 )) ECR 837 at paragraph 5 .

( 7 ) Council Regulation of 29 October 1975 on the common organization of the market in cereals, Official Journal 1975, L 281, p . 1 .

( 8 ) See for example common organization of the market in poultry, judgment of 18 May 1977 in Case 111/76 Officier van Justitie v Beert van den Hazel (( 1977 )) ECR 901; common organization of the market in pigmeat, judgment of 29 November 1978 in Case 83/78 Pigs Marketing Board v Redmond (( 1978 )) ECR 2347; common organization of the market in beef and veal, judgment of 16 December 1986 in Case 124/85 Commission v Hellenic Republic (( 1986 )) ECR 3935 .

( 9 ) See Case 83/78, supra, at paragraph 56 et seq .

( 10 ) See the second page of Annex 8 to the application : "It is possible that when the system was first applied certain delays may have occurred ".

( 11 ) See the judgment of 31 January 1984 in Joined Cases 286/82 and 26/83 Luisi and Carbone v Ministero del Tesoro (( 1984 )) ECR 377 .

( 12 ) See Decision E 6/963 of 21 February 1984 ( Annex 2 to the defendant' s answer to the questions put by the Court ).