Judgment of the Court (Sixth Chamber) of 13 October 1993. - An Bord Bainne Co-operative Ltd and Compagnie Interagra SA v Intervention Board for Agricultural Produce. - Reference for a preliminary ruling: High Court of Justice, Queen's Bench Division - United Kingdom. - Forfeiture of a security - Force majeure. - Case C-124/92.



European Court reports 1993 Page I-05061



Summary

Parties

Grounds

Decision on costs

Operative part



Keywords

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Agriculture ° Common organization of the markets ° Rules on lodging security ° Force majeure ° Concept ° Amendment in a State-trading country of the quality requirements for imported products ° No longer possible to carry out an export operation in respect of which security has been lodged ° Not force majeure

(Commission Regulation No 765/86)

Summary

In the context of agricultural relations, the concept of force majeure takes into account the particular nature of the public-law relationships between traders and the national administration, as well as the objectives of those regulations. It is not limited to absolute impossibility but must be understood in the sense of abnormal and unforeseeable circumstances, outside the control of the trader concerned, the consequences of which, in spite of the exercise of all due care, could not have been avoided except at the cost of excessive sacrifice.

The amendment of the legislation of a non-member country governing the quality of imported products, in consequence of which it is impossible to carry out an export to that non-member country, planned by a trader and entailing commitments on his part ° such as the lodging of a security under the rules on tenders in Regulation No 765/86 laying down detailed rules for the sale of butter from intervention stock for export to certain destinations ° must be regarded as a circumstance outside the control of the trader concerned.

However, in the case of exports to a State-trading country, such an occurrence cannot be regarded as abnormal and unforeseeable. On the contrary, it constitutes a usual commercial risk in commercial transactions with an organization of such a country which is directly subject to the public authority of that State. Traders who engage in such transactions run the risk that the legislation governing the import of products sold to that State-trading organization will subsequently be altered by sovereign act of the State in question, even after a very long period of stability.

A prudent trader, who cannot be unaware of that risk and who is at liberty to choose his trading partners, must take appropriate precautions, either by inserting a suitable clause in the contract or by taking out specific insurance. If that is not possible and he still enters the contract, he accepts that risk and must bear the consequences.

Parties

In Case C-124/92,

REFERENCE to the Court under Article 177 of the EEC Treaty by the Queen' s Bench Division (Commercial Court) of the Supreme Court of England and Wales for a preliminary ruling in the proceedings pending before that court between

An Bord Bainne Co-operative Ltd and

Compagnie Inter-Agra SA

and

Intervention Board for Agricultural Produce,

on the interpretation of Commission Regulation (EEC) No 765/86 of 14 March 1986 laying down detailed rules for the sale of butter from intervention stock for export to certain destinations (OJ 1986 L 72, p. 11),

THE COURT (Sixth Chamber),

composed of: G.F. Mancini, President of the Chamber, M. Diez de Velasco, C.N. Kakouris, F.A. Schockweiler and P.J.G. Kapteyn, Judges,

Advocate General: C. Gulmann,

Registrar: L. Hewlett, Administrator,

after considering the written observations submitted on behalf of:

° An Bord Bainne Co-operative Ltd and Compagnie Inter-Agra SA, by D. Vaughan QC, and D. Anderson, Barrister,

° the United Kingdom, by J.E. Collins, Assistant Treasury Solicitor, acting as Agent, assisted by A. Macnab, Barrister,

° the Italian Government, by Professor Luigi Ferrari Bravo, Head of the Department for Legal Affairs of the Ministry of Foreign Affairs, acting as Agent, assisted by P.G. Ferri, Avvocato dello Stato,

° the Commission of the European Communities, by H.G. Crossland and C. Docksey, of its Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of An Bord Bainne Co-operative Ltd and Compagnie Inter-Agra SA, the United Kingdom, represented by C. Vajda, Barrister, assisted by J.E. Collins, and the Commission, at the hearing on 29 April 1993,

after hearing the Opinion of the Advocate General at the sitting on 10 June 1993,

gives the following

Judgment

Grounds

1 By order of 24 February 1992, received at the Court on 16 April 1992, the Queen' s Bench Division of the Supreme Court of England and Wales referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a number of questions on the interpretation of Commission Regulation (EEC) No 765/86 of 14 March 1986 laying down detailed rules for the sale of butter from intervention stock for export to certain destinations (OJ 1986 L 72, p. 11).

2 Those questions were raised in the course of proceedings between, on the one hand, An Bord Bainne Co-operative Ltd (hereinafter "An Bord Bainne") and Compagnie Inter-Agra SA (hereinafter "Inter-Agra") and, on the other, the Intervention Board for Agricultural Produce (hereinafter "the Intervention Board") regarding the latter' s refusal to release the security lodged pursuant to Article 6 of Regulation No 765/86.

3 By a contract dated 16 September 1985, Inter-Agra agreed to sell 15 000 tonnes of butteroil to Prodintorg, a trading organization in the Soviet Union. One of the terms of the contract was that the butteroil should conform to the conditions set out in its first addendum.

4 On 8 April 1986, An Bord Bainne responded to a special invitation to tender made by the Intervention Board by submitting a tender for 11 000 tonnes of salted butter accompanied by a written undertaking that the butter would be exported to the USSR after being processed into butteroil. The tender was submitted pursuant to a contract between An Bord Bainne and Inter-Agra under which An Bord Bainne had undertaken both to supply butter to Inter-Agra, so that the latter could perform its contract with Prodintorg, and to lodge the tendering security required by Article 6 of Regulation No 765/86.

5 On 14 April 1986, the Intervention Board informed An Bord Bainne that it had been awarded the 11 000 tonnes of salted butter. That butter satisfied the requirements for conversion into butteroil laid down by the Soviet technical standards in force at that time, as well as the terms of the contract between Inter-Agra and Prodintorg. However, by a decision of 5 May 1986, the Soviet authorities changed their quality requirements for imported butteroil, which had been in force since 1955. As it did not meet the new criteria, the butter acquired by An Bord Bainne could no longer be imported into the USSR.

6 Neither Inter-Agra nor An Bord Bainne had been informed of the change in quality requirements. By letter of 26 November 1986, An Bord Bainne informed the Intervention Board that for reasons of force majeure it was unable to fulfil the export contract and requested release of the tendering security. By letter of 2 December 1986, the Intervention Board replied that, since the butter had not been removed before 1 December 1986, as required by Article 10(1) of Regulation No 765/86, the entire tendering security was forfeit by virtue of Article 6(1). By letter of 2 February 1989, the Intervention Board called in the guarantee provided by An Bord Bainne.

7 On 19 April 1990, An Bord Bainne and Inter-Agra brought proceedings against the Intervention Board before the Queen' s Bench Division (Commercial Court) of the Supreme Court of England and Wales in which they claimed that for reasons of force majeure the tendering security was not forfeit.

8 In the context of those proceedings that court referred the following questions to the Court of Justice of the European Communities for a preliminary ruling:

"1. Is there force majeure within the meaning of Community law and for the purposes of Commission Regulation (EEC) No 765/86 when:

(a) a tender by a Community undertaking for the purchase of butter pursuant to Regulation (EEC) No 765/86 was accompanied by a written undertaking in accordance with the said regulation that the butter would be converted into butteroil and exported from the Community to a specified third country;

(b) the tender was accepted by the national intervention agency;

(c) the competent authorities of the third country, pursuant to the relevant legislation of that country, then changed the quality requirements for imported butteroil in such a way as to render it impossible (despite the best efforts of the intending exporter) for acceptable butteroil to be produced from the butter which was the subject of the tender so as to enable export to be made to that country in accordance with the written undertaking;

(d) the change in the quality requirements was not published or communicated to the tenderer or intending exporter in advance, and was totally unexpected by them?

2. If the answer to Question 1 is yes, does force majeure in the circumstances of this case operate to prevent the forfeiture of securities provided pursuant to Commission Regulation (EEC) No 765/86, and in particular a tendering security provided pursuant to Article 6(1) thereof?"

9 Reference is made to the Report for the Hearing for a fuller account of the relevant provisions, the background to the dispute, the procedure and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

Question 1

10 In replying to Question 1, it must first be borne in mind that the Court has consistently held that, since the concept of force majeure does not have the same scope in the various spheres of application of Community law, its meaning must be determined by reference to the legal context in which it is to operate.

11 The concept of force majeure adopted by the agricultural regulations takes into account the particular nature of the public-law relationships between traders and the national administration, as well as the objectives of those regulations. It follows from those objectives as well as from the concrete provisions of the regulations in question that the concept of force majeure is not limited to absolute impossibility but must be understood in the sense of abnormal and unforeseeable circumstances, outside the control of the trader concerned, the consequences of which, in spite of the exercise of all due care, could not have been avoided except at the cost of excessive sacrifice (see inter alia judgment in Case 11/70 Internationale Handelsgesellschaft v Einfuhr- und Vorratsstelle Getreide [1970] ECR 1125).

12 The amendment of the legislation of a non-member country governing the quality of products imported into that country, in consequence of which a planned export to that non-member country cannot be carried out, must be regarded as a circumstance outside the control of the trader concerned.

13 However, in a case such as that in the main proceedings, the other conditions referred to in the Court' s case-law cannot be considered to have been met. Such an occurrence constitutes a usual commercial risk in commercial transactions with an organization of a State-trading country which is directly subject to the public authority of that State. As the Commission has rightly observed, traders who engage in such transactions run the risk that the legislation governing the import of products sold to that State-trading organization will subsequently be altered by sovereign act of the State in question.

14 The plaintiffs also claim that the amendment to the Soviet legislation must be regarded as an abnormal and unforeseeable occurrence since that legislation had remained in force for 30 years and no prior notice or publicity was given of the amendment.

15 That argument cannot be accepted. When he engages in a commercial transaction in products intended to be sold in a non-member country to an organization such as that described above, a prudent trader must anticipate changes in the rules of the importing State which lay down the conditions regarding the quality of the products imported and on which the performance of the transaction depends, even if those rules have remained unchanged for a long period.

16 Furthermore, it is up to a prudent trader, who is, moreover, wholly at liberty to choose his trading partners on the basis of his perceived interests, to take appropriate precautions, either by inserting a suitable clause in the contract in question or by taking out specific insurance. Such diligence is all the more necessary in a case such as that at issue in the main proceedings because, under Regulation No 765/86, the butter obtained by An Bord Bainne cannot be exported to destinations other than the USSR. If, as the plaintiffs submit, it was not possible to take such steps under the contract of sale concluded with the trading organization concerned, it is the trader who accepted that risk who must bear the consequences.

17 Accordingly, the reply to be given to the Queen' s Bench Division of the Supreme Court of England and Wales is that the circumstances described in the questions submitted for a preliminary ruling do not constitute force majeure within the meaning of Community law and for the purposes of Regulation No 765/86.

18 In view of the reply to Question 1, there is no need to give a reply to Question 2.

Decision on costs

Costs

19 The costs incurred by the United Kingdom, the Italian Government and the Commission of the European Communities, which have submitted observations to the Court, are not recoverable. Since these proceedings are, for the parties to the main proceedings, a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

Operative part

On those grounds,

THE COURT (Sixth Chamber),

in answer to the questions referred to it by the Queen' s Bench Division of the Supreme Court of England and Wales, by order of 24 February 1992, hereby rules:

The circumstances described in the questions submitted for a preliminary ruling do not constitute force majeure within the meaning of Community law and for the purposes of Commission Regulation (EEC) No 765/86 of 14 March 1986 laying down detailed rules for the sale of butter from intervention stock for export to certain destinations.