Opinion of Mr Advocate General Lenz delivered on 27 October 1987. - Les Grands Moulins de Paris v European Economic Community. - Non-contractual liability of the Community - Refusal to grant production refunds. - Case 50/86.



European Court reports 1987 Page 04833



Opinion of the Advocate-General

++++

Mr President,

Members of the Court,

A - Facts

1 . In the proceedings on which I deliver my opinion today, the Society Les Grands Moulins de Paris, the applicant, seeks compensation from the European Economic Community, represented by its institutions the Council and the Commission, the defendants, for the damage which it claims to have suffered by reason of the fact that the Community institutions did not grant for its product "Granidon" the production refunds provided for in respect of substitute products .

2 . The applicant considers the different treatment of Granidon and its substitute products unlawful . In its view, owing to the refusal to grant production refunds on Granidon, it has suffered damage which it divides into three parts :

Production refunds not paid on Granidon : FF 31 214.48

Profit lost in the last five years : FF 6 million

Costs of producing Granidon : FF 271 000 .

3 . The applicant accordingly claims that the Court should :

Order the European Economic Community to pay it the sum of FF 6 302 224.48 together with interest calculated from the day on which the application was lodged;

Order the European Economic Community to pay the costs .

4 . The Council contends that the Court should :

Dismiss the application in so far as it is directed against it;

Reserve the costs at this stage of the proceedings .

5 . The Commission contends that the Court should :

Dismiss the application as unfounded;

Order the applicant to pay the costs .

B - Opinion

I - Admissibility

6 . The Council takes the view that the application is wrongly directed against it : the possible basis of liability is the non-inclusion of Granidon in the list of products eligible for production refunds . However, the Commission has never submitted to it a proposal to include Granidon amongst those products . It has never therefore been in a position to take a decision allowing production refunds to be granted on Granidon . Therefore, in its view, only the Commission should represent the Community before the Court .

7 . The Court has held in a previous case that, under the Community legal system, it is in the interests of a good administration of justice that, where Community liability is involved by reason of the act of one of its institutions, it should be represented before the Court by the institution or institutions against which the matter giving rise to liability is alleged . ( 1 ) Consequently, in an action for damages brought against the European Economic Community, which had relied on allegedly unlawful legislation of the Council, the Court allowed the application against the Community represented by the Council and the Commission since the Council had adopted the contested measure upon the Commission' s proposal .

8 . The same principle must apply if the measure involving Community liability were attributable to a legislative omission on the part of the Council . Since the Council and the Commission act jointly in the legislative process in which the Commission has the right to take the initiative but the Council takes the final decision, it does not seem reasonable to allow the Community to be represented only by the Commission, which, after all, could not have drawn up the omitted legislative measure on its own authority . That conclusion is not shaken by the fact that, according to Article 43 of the EEC Treaty, the Council can only act upon a Commission proposal in matters concerning the common agricultural policy since, according to Article 152 of the EEC Treaty, the Council may request the Commission to submit to it any appropriate proposals . However, it did not do this with regard to the matter now in question .

9 . No further objections to the admissibility of the application are evident and none were seriously submitted by the parties . Although the Commission argues that the applicant could certainly have challenged the decisions refusing payment of the production refund before the French administrative courts and in those proceedings urged a reference for a preliminary ruling to be made to the Court, it concedes that, according to the case-law of the Court, an action for damages under Article 178 and 215 of the EEC Treaty must be regarded as an independent remedy . With that statement it must be agreed .

10 . The action against the European Economic Community, represented by the Council and the Commission, is therefore admissible .

II - Substance

1 . The unlawfulness of the conduct of the Community institutions

11 . The applicant takes the view that the European Economic Community has incurred liability towards it by not allowing the rules on production refunds granted in respect of the products traditionally used in the brewing industry to apply to Granidon . It claims that Granidon can be used as a substitute product for starch and maize gritz, that is to say products traditionally used in the brewing industry; if production refunds are granted in respect of starch and maize gritz but not in respect of the substitute product Granidon, this constitutes a breach of the principle of equal treatment .

12 . The Commission, which is the only one of the defendant institutions to have replied to the substance of the applicant' s charge, first points out that Granidon is a product sui generis which is not one of the products attracting a production refund until 1986 or 1989 . Only when Granidon is purified, in a further process, of proteins still present at that stage does one necessarily arrive at the production of starch to which the system of production refunds would then apply .

13 . The Commission states that it is by no means proved that Granidon may be used as a substitute for other products used in the brewing industry and attracting production refunds .

14 . It must be borne in mind first of all that the product manufactured by the applicant is not identical with those products ( 2 ) on which production refunds were granted . In view of its high protein content, it is not quite the same as the product which it probably resembles most closely, which is wheat starch . Even though it was only in Commission Regulation No 2169/86 of 10 July 1986 laying down detailed rules for the control and payment of the production refunds in the cereals and rice sectors ( 3 ) that it was stipulated that the degree of purity of starch in the dry matter must in all cases be at least 97%, it may not be assumed that during the period of over 18 years in which production refunds were granted on certain kinds of starch the term "starch" had not been defined . At any rate, the possibility for a product consisting of only 85% starch to be regarded as starch for the purposes of production refunds must have been excluded . Otherwise the applicant could have demanded production refunds on the basis of the law then in force .

15 . The applicant' s conduct reflects that situation : in its own submission, in the period in which it produced Granidon it never attempted to obtain for that product the production refunds payable in respect of starch .

16 . It thus remains to examine whether the European Economic Community was obliged by virtue of the general principle of equal treatment to grant production refunds on Granidon as a substitute for certain products used in the brewing industry .

17 . To support its proposition that, in order to observe the principle of equal treatment, substitute products should also attract production refunds, the applicant relies in particular on the Court' s judgments of 19 October 1977 ( 4 ) and 4 October 1979 . ( 5 )

18 . In the judgments of 19 October 1977 the Court held first of all that, according to the second subparagraph of Article 40 ( 3 ) of the Treaty, the common organization of agricultural markets had to exclude any discrimination between producers or consumers within the Community . That provision undoubtedly prohibited any discrimination between producers of the same product; however, it did not refer in such clear terms to the relationship between different industrial or trade sectors in the sphere of processed agricultural products . Nevertheless, the prohibition of discrimination laid down in the aforesaid provision was merely a specific enunciation of the general principle of equality, which was one of the fundamental principles of Community law . That principle required that similar situations should not be treated differently unless differentiation was objectively justified .

19 . Applying those principles the Court then went on to consider in Joined Cases 117/76 and 16/77 the abolition of the production refund on quellmehl and the retention of the production refund on starch . In doing so, it had to take into account the particular fact that until 1974 the Community regulations were based on the assumption that both products were interchangeable . Since the defendant Community institutions were not able to justify the different treatment of the two products as from 1974, the Court then held in its judgment of 19 October 1977 that it was not established that there were objective circumstances which could have justified the alteration of the previous system . Consequently, the abolition of the refund for quellmehl when the refund for maize-based starch was maintained constituted a breach of the principle of equal treatment .

20 . The Court stated something similar in its judgment of 19 October 1977 in Joined Cases 124/76 and 20/77 . In that judgment, too, it held that in view in particular of the length of time during which the two products in question ( maize groats and meal on the one hand and maize starch on the other ) were given equality of treatment with regard to production refunds, it was not established that there were objective circumstances which could have justified altering the Community rules . In that case, too, the Court found that the principle of equal treatment had been disregarded .

21 . In the judgments of 4 October 1979 the Court then drew the necessary conclusion from the decisions of 19 October 1977 and in essence found that the undertakings concerned were entitled to compensation .

22 . The common feature in the aforesaid decisions was that products which had previously been treated identically were treated differently from a certain point in time . However, that fact alone would probably still not have persuaded the Court to find that the prohibition of discrimination had been disregarded if the Community institutions had been in a position to substantiate their view that on account of new findings the aforesaid products were no longer interchangeable . Consequently, it seems to me that a further legal principle is implicit in the aforesaid decisions, namely the principle of the protection of legitimate expectation : the traders concerned were entitled to rely on the fact that the Community institutions would continue to regard the aforesaid products as interchangeable - a fact which was recognized in the legislation of the Community - until an objective alteration in the situation occurred . For only where the interchangeability of the products is established is it possible to consider the general principle of equal treatment or the prohibition of discrimination .

23 . A point worth noting in this connection is that in both judgments of 19 October 1977 the Court found that, whilst the second subparagraph of Article 40 ( 3 ) of the Treaty undoubtedly prohibited any discrimination between producers of the same product, it did not refer in such clear terms to the relationship between different industrial or trade sectors in the sphere of processed agricultural products . To that extent, the case-law of the Court seems to me to give the Community institutions a certain degree of discretion as regards the question of comparability of similar products even when applying the principle of equal treatment . If it is conceded that such a discretion exists in the case of traditional products, then it must be even more true when it is a question of assessing the economic importance of a product new to the market in order then to be able to draw the necessary legal conclusions . Finally, the principle of the protection of legitimate expectation no longer applies in this case .

24 . Another point to be considered in this regard is that the production refund provided for in Article 11 of the common market organization for cereals is not meant to stabilize cereal rices - that is the purpose of the intervention rules - but rather to ensure that the basic products needed by the processing industry are made available to it at a lower price than that which would result from applying the rules of the common market organization . ( 6 )

25 . For starch-product manufacturers, the grant of the production refund is therefore a reflection of the favourable treatment shown towards the industry . Therefore, a certain amount of caution is called for in the application of the principle of equal treatment to new kinds of possibly interchangeable products, that is to say products which are not directly comparable to the products indirectly receiving preferential treatment .

26 . Although the applicant has shown that its product could be used in the brewing industry with some success, it has not proved beyond doubt that it is fully interchangeable with the traditional products . It is also clear that the product in question is a preliminary product which could be processed into starch through a further process and which could then attract production refunds .

27 . In those circumstances Granidon cannot be equated with starch . There is therefore no breach of the principle of equal treatment .

2 . The special requirements needed for a legislative wrong to give rise to liability

28 . Since no unlawful conduct on the part of the Community institutions was found, further examination of the claim for damages would be unnecessary; I will therefore examine the further submissions of the applicant only for the sake of completeness .

29 . Assuming that the action of the Community institutions had been unlawful, it would be necessary to examine whether the strict requirements laid down in case-law regarding the liability of the Community institutions for a legislative wrong are fulfilled in the present case .

30 . In the case of legislation involving choices of economic policy, such liability can be incurred only if a sufficiently serious breach of a superior rule of law for the protection of the individual has occurred . In this regard the Court held inter alia in its judgment of 25 May 1978 in Joined Cases 83 and 94/76, 4, 15 and 40/77 ( 7 ) that, having regard to the principles applying in the legal systems of the Member States in this sphere, the institution concerned must have manifestly and gravely exceeded its powers . ( 8 )

31 . In principle it is not to be excluded that a breach of the prohibition of discrimination may be regarded as a breach of a superior rule of law for the protection of the individual . If the European Economic Community were to treat producers of the same product differently for example, it is quite possible that it could incur liability through that action . However, that principle cannot apply so strictly where the equal treatment of interchangeable products is concerned . Finally, as the Court stated in its judgment of 19 October 1977, the prohibition of discrimination laid down in Article 40 of the EEC Treaty does not refer in such clear terms to the relationship between different industrial or trade sectors in the sphere of processed agricultural products . Furthermore, the present case concerns alleged discrimination brought about by an omission, which would therefore raise the question from which point in time could it be said that the Community institutions had a legal duty to act, only upon the breach of which a claim for damages could be based .

32 . The applicant' s first application for Granidon to be included in the system of production refunds was made to the Directorate-General for Agriculture of the Commission in June 1973 but at that time it received no reply . The applicant let the matter rest .

33 . If the Commission may still be regarded as having a legal duty to consider the applicant' s request and determine whether a production refund had to be granted for Granidon, the fact that no such refund was granted still cannot be considered a grave breach of the principle of equal treatment or a manifest and serious overstepping of powers for the following reasons : since the Commission had been anxious since 1970 to restrict the system of production refunds and since its proposals had at least some success in the Council - until the Court in its judgment of 19 October 1977 declared invalid the Council regulations enacted on the Commission' s proposal - it cannot be blamed for not wanting to have the Council include new products in the system of production refunds at a time when it was anxious to restrict the production refunds . It thus acted within the limits of its discretion in making decisions of economic policy, even if it supposedly infringed the principle of equal treatment through that conduct . The Commission tried to pursue a consistent and logical economic policy on the question of production refunds and this attempt cannot be regarded as a manifest and serious overstepping of its powers .

34 . A comparable assessment must then apply as regards the requests made by the applicant in 1984 and 1985 to have Granidon included in the system of refunds . It must be conceded that the development and marketing of the applicant' s product may have been hindered by the rather slow decision-making process of the Community institutions but this is due to the ponderous nature of the Community decision-making mechanism, which a trader wishing to receive subsidies for a newly-developed product on a regulated "market" when he knows that no provision has been made for them to be paid on that product must put up with .

35 . Therefore, even if the Community institutions had acted unlawfully, the conditions for the European Economic Community to incur liability for a legislative wrong in the sphere of economic policy would not be fulfilled .

3 . The damage incurred

36 . Last of all, on the question of damage, there would remain to consider the existence of damage and of a causal link between the Community' s omission and the damage suffered by the applicant .

37 . The damage may be divided into three elements : lost production refunds, lost profit and extra production costs .

( a ) Lost production refunds

38 . The claim for FF 31 214.48 would have to be granted since that amount was no longer disputed by the Commission in its rejoinder .

( b ) Lost profit

39 . The applicant estimates that it would have made a profit of FF 6 000 000 in the last five years prior to its action if Granidon had been competitive through the grant of production refunds . That estimate is based on assumptions regarding the possible market share which Granidon could have captured in the brewing industry . According to the applicant, those assumptions are based on market research which has been undertaken by the applicant itself and does not show the objective factors on which the expected turnover is meant to be based . Even the correspondence between the applicant and various breweries, which has been submitted to the Court at its request, does not enable any reliable conclusion to be drawn about the level of expected turnover . Furthermore, according to the accounts for the financial year 1985/86 submitted by the applicant, a loss would have occurred even if production refunds had been granted . The burden would be on the applicant at least to show how a profit of FF 6 000 000 for the previous five years may positively be deduced from that loss . However, since it has not done so, it has not proved that it actually lost the profit in question .

( c ) Repayment of production costs

40 . The applicant has not corroborated these costs which allegedly amount to FF 271 010 . In particular, it has not shown why it was necessary in 1985 to engage a project manager when the development of Granidon was supposed to have been finished at the end of the 1960s . It must also be pointed out that direct production costs would have to be included in the general costs for Granidon, which represent an element which would have to be taken into account in the calculation of the lost profit .

41 . The direct production costs cannot therefore be recognized as separate damage for which compensation must be paid .

4 . Costs

42 . Since the application must therefore be dismissed, the applicant must be ordered to pay the costs in accordance with Article 69 ( 2 ) of the Rules of Procedure with the exception of the costs of the Council, which has made no express submission with regard to costs .

C - Conclusion

In conclusion, I propose that the Court should decide as follows :

( 1 ) The application is dismissed;

( 2 ) The applicant is ordered to pay the costs except the Council' s costs;

( 3 ) The Council is to bear its own costs .

(*) Translated from the German .

( 1 ) Judgment of 13 November 1973 in Joined Cases 63 to 69/72 Wilhelm Werhahn Hansmoehle and Others v Council and Commission of the European Communities (( 1973 )) ECR 1229, at p . 1247 .

( 2 ) Regulation No 367/67/EEC of the Council of 25 July 1967 fixing production refunds on maize gritz and meal and broken rice used in the brewing industry, Official Journal, English Special Edition 1967, p . 216; Regulation No 371/67/EEC of the Council of 25 July 1967 fixing production refunds on starches and quellmehl, Official Journal, English Special Edition 1967, p . 219 .

( 3 ) Official Journal 1986, L 189, p . 12 .

( 4 ) Judgment of 19 October 1977 in Joined Cases 117/76 and 16/77 Albert Ruckdeschel & Co . and Another v Hauptzollamt Hamburg-St Annen; Diamalt AG v Hauptzollamt Itzehoe (( 1977 )) ECR 1753; judgment of 19 October 1977 in Joined Cases 124/76 and 20/77 SA Moulins et Huileries de Pont-à-Mousson v Office national interprofessionnel des céréales ( ONIC ); Providence agricole de la Champagne v ONIC (( 1977 )) ECR 1795 .

( 5 ) Judgment of 4 October 1979 in Joined Cases 241, 242 and 245 to 250/78 DGV, Deutsche Getreideverwertung und Rheinische Kraftfutterwerke GmbH and Others v Council and Commission of the European Communities (( 1979 )) ECR 3017; judgment of 4 October 1979 in Joined Cases 261 and 262/78 Interquell Staerke-Chemie GmbH & Co . KG and Another v Council and Commission of the European Communities (( 1979 )) ECR 3045; judgment of 4 October 1979 in Joined Cases 64 and 113/76, 167 and 239/78, 27, 28 and 45/79 P . umortier frères SA and Others v Council of the European Communities (( 1979 )) ECR 3091 .

( 6 ) See the 10th recital of the preamble to Regulation No 120/67 and the ninth recital of the preamble to Regulation No 2727/75 .

( 7 ) Judgment of 25 May 1978 in Joined Cases 83 and 94/76, 4, 15 and 40/77 Bayerische HNL Vermehrungsbetriebe GmbH & Co . KG and Others v Council and Commission of the European Communities (( 1978 )) ECR 1209, at p . 1225 .

( 8 ) Judgment of 6 December 1984 in Case 59/83 Biovilac NV v European Economic Community (( 1984 )) ECR 4057, at p . 4075 .