OPINION OFMRREISCHL —CASE 125/77
OPINION OFMRADVOCATE GENERAL REISCHL
DELIVERED ON20JUNE 1978 <appnote>1</appnote>
MrPresident,
Members oftheCourt,
Thecaseswhichconcern ustodayare
aboutaproduct known as"isoglucose"
whichwehavealready encountered in
Case101/76 (Koninklijke Scholten-
HonigN.V.vCouncil andCommission
oftheEuropean Communities, judgment
of5May1977[1977]ECR797).
Isoglucose isanewsweetener inliquid
formwhichoriginated intheUnited
Statesatthebeginning oftheseventies,
100kilograms ofwhichareapproxi­
mately equivalent to71kilograms of
whitesugar.Itismanufactured from
starch which hasbeenobtained from
maizeorwheatorpotatoes. Inthe
Community therelevant rawmaterial is
principally maizeandtoalesserextent
other cereals andtherecorded
processing figures varybetween 70%
and85%inthecaseofmaize and
15%to30%inthecaseofother
cereals. However fromtheautumn 1977
onwards —aswewereassured—only
maize wasused astherawmaterial
50%ofwhich hadtobeimported
because Community production falls
shortofrequirements. Isoglucose is
usedintheindustrial production of
foodstuffs whereitcanreplace liquid
sugar.
IntheCommunity isoglucose ismanu­
factured ontheonehandbythe
Netherlands company Koninklijke
Scholten-Honig which,afterobtaining a
licence in1972andbuilding an
experimental plant, commenced
production inSeptember 1973and
increased itinSeptember 1975after
enlarging itsfactory. However inthe
meantime theScholten group, aswe
heardduring theoralprocedure, has
become insolvent asfrom7March 1978andasplit-upofthegroupisapparently
underway.Isoglucose isalsomanu­
factured bytheBelgian company G.R.
Amylum N.V.,theapplicant inoneof
theactionsfordamages (Case116/77)
withwhichIhavetodealinmyopinion
whichfollows thisone.Thiscompany
alsocommenced production earlyon,in
February 1972,andlikewise enlarged its
plant.Inaddition Royal Scholten-
Honig(Holdings) Limited, asubsidiary
ofKoninklijke Scholten-Honig N.V.,
decided in1973tobuildaplantfor
manufacturing isoglucose withan
annual capacity of85000tonnes and
commenced building atTilbury in
October 1974.Lastly theEnglish
company Tunnel Refineries hasin
recent yearsinvested aconsiderable
amount ofcapiulinthemanufacture of
isoglucose inconnexion withanexisting
starchfactory. Partofthecapacity thus
created hasapparently beeninusesince
January 1976.
Inthecaseofthemanufacture of
isoglucose twogroups ofCommunity
provisions arematerial andtheirvalidity
hastobeexamined inthepresent
proceedings. Onedealswiththe
granting ofproduction refunds in
connexion withthemanufacture of
starchproducts, theotherwithtaking
isoglucose outoftheorganization of
themarket insugarandlayingdown
special common provisions forthis
product, inparticular theimposition of
aproduction levyonitsmanufacture.
Onthispoint—itwasinpantheissue
inCase101/76 —thefollowing
detailed information isnecessary:
Article 11ofRegulation (EEC) No
2727/75 oftheCouncil of29October
1975(Official Journal 1975,L281,p.
1)onthecommon organization ofthe
1—Translated fromtheGerman
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KONINKLIJKE SCHOLTEN-HONIG vHOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUKTEN
market incereals provides thata
production refundmaybegranted:
"(a)formaizeandcommon wheatused
intheCommunity forthemanu­
factureofstarch;
(b)forpotatostarch;
(c)formaizegroatsandmealusedin
theCommunity forthemanu­
facture ofglucose bydirect
hydrolosis."
Article 11(3)provides thattheCouncil,
acting byaqualified majority ona
proposal fromtheCommission, shall
adoptrulesfortheapplication ofthis
article andfixtheamount ofthe
production refund. TheCouncil didso
bymeansofRegulation (EEC)No
2742/75 of29October 1975(Official
Journal 1975,L281,p.57)on
production refunds inthecereals and
ricesectors which wasamended by
Council Regulation (EEC)No1862/76
of27July1976(Official Journal 1976,
L206,p.3)whichentered intoforceon
1August 1976.Thelatterregulation
provided foranincrease ofproduction
leviesforthe1976/77 marketing year
because thethreshold priceformaize
hadbeenincreased. However inthe
caseofstarchproducts intended forthe
manufacture ofisoglucose —andthisis
oneoftheissuesinthepresent cases—
theratesoftherefund forthe1975/76
marketing yearweremaintained and
refunds werenolongergranted with
effectfrom 1August 1977.Thiswas
doneinsuchawaythattherefundpaid
bythecompetent authorities ofthe
Member States toallstarch manufac­
turers wasrecovered totheextent to
whichisoglucose wasextracted fromthe
starch. Commission Regulation (EEC)
No2158/76 of31August 1976
(Official Journal 1976,L241,p.21)
lavsdowntherulesfortheapplication
ofRegulation (EEC)No2742/75. By
virtueofArticle 4ofRegulation (EEC)
No2158/76 those rulesentered into
forceon3September 1976andwereto
beapplied asfromIAugust 1976.Inconnexion withthespecialorgani­
zationofthemarketinisoglucose some
oftheprinciples oftheorganization of
themarket insugarwhichoriginally
included isoglucose mustfirstofallbe
recalled, sinceisoglucose hastobe
assigned totariffheadings 17.02Dand
17.05 Dwhich arespecifically
mentioned inArticle 1ofRegulation
No3330/74 of19December 1974,
L359,p.1).
Theorganization ofthemarketinsugar
contains rulesrelating toquotaswhich
applyunultheendofJune1980.As
provided forintheseruleseach
Member Statehasabasicquotawhich
hastobeallotted totheproducers. A
salesandpriceguarantee applies upto
theamount ofthebasicquota(A
sugar): national intervention agencies
buythesugarattheintervention price,
which isusually abovetheworldprice.
There isalsoamaximum quota(B
sugar)whichhastobefixedeveryyear
andisexpressed asapercentage ofthe
basicquota. There isalsoaprice
guarantee forit—inthe1976/77 and
1977/78 marketing yearsthemaximum
quotaamounted to135%anditwas
reduced to127.5% forthe1978/79
marketing year.However producers are
required tomakeacontribution tothe
costsofintervention andexpon—A
andBsugarcanbeexponed witha
refund —andthetotallossesincurred
bybringing ontothemarket sugar
whichexceeds consumption aredivided
bythequantities ofBsugarproduced.
However thetotalcontribution maynot
amount tomore than30%ofthe
intervention pricewhich represents a
ceilingforthe1977/78 marketing year
of9.85unitsofaccount per100
kilograms ofwhite sugar. Sugar
produced which exceeds themaximum
quota(Csugar) mayinprinciple —
exceptwhenthereisashortage inthe
Community astherewasin1974and
1975—onlybesoldontheworld
market atworldprices.
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OPINION OFМRREISCHL —CASE 125/77
Isoglucose wastakenoutoftheorgani­
zationofthemarket insugarbecause
specialprovisions werelaiddownforit
byCouncil Regulation (EEC)1110/77
of17May1977(Official Journal 1977,
L134,p.1).Common provisions for
isoglucose, whichamounted virtually to
amini-market organization, werelaid
downinCouncil Regulation (EEC)No
1111/77 of17May1977(Official
Journal 1977,L134,p.4)whichwas
adopted onthesameday.Itcontains
provisions ontradewiththirdcountries,
importleviesandexportrefunds. Butits
mostimportant provisions, whichhave
special relevance inthepresent cases,
introduced aproduction levyfor
isoglucose. Inprinciple theamount of
thislevyisthesameasthatapplicable to
Bsugar.However forthe1977/78
marketing yearcommencing on1July
1977itislimitedtofiveunitsofaccount
per100kilograms ofdrymatter; and
thisamount shallonlyapplyifthe
production levyforBsugarexceeds five
unitsofaccount forevery100kilograms
ofwhitesugarforthesameperiod.The
Council hasinthemeantime extended
thislimitation tofiveunitsofaccount
untiltheexpiryoftherulesrelating to
quotas, thatisuntil1980.Implementing
rulesforapplying theproduction levy
werelaiddowninCommission Regu­
lation(EEC)No1468/77 of30June
1977(Official Journal 1977,L162,p.
7).Under thisregulation thesame
method ofcalculation applies to
isoglucose astosugarbeet.
These provisions havecaused several
anions tobebrought inthenational
courts.
Before theHighCourtofJustice in
England theplaintiff inthemainaction
inCase103/77 askedforadeclaration
thattheUnited Kingdom Government
isnotempowered toimplement Regu­
lations Nos1862/76, 1110/76 and
1111/77, because theyareinvalid; the
plaintiffs inthemainanion inCase
145/77 asked foradeclaration that
Regulation 1111/77 isinvalid andconsequently cannot beimplemented by
thenational Intervention Board. Several
reasons basedonCommunity lawwere
putforward insupport whichmustbe
considered laterindetail.Theplaintiffs
reliedinparticular onaninfringement
oftheprohibition ofdiscrimination in
Article40andviolation oftheobjectives
ofArticle39oftheEECTreatyand
alsooftheprinciple ofproportionality.
IntheNetherlands casethedefendant
inthemainaction served onthe
plaintiff, theKoninklijke Scholten-
Honig N.V.,inDecember 1976a
statement ofaccount oftheproduction
refunds forprocessing maizeintostarch
duringtheperiodfrom 1Augustto31
October 1976. Since thisstatement
worked outinaccordance withRegu­
lationNo1862/76 andNo2158/76
showed adebitforthesaidperiodin
respectoftheprocessing ofstarchinto
isoglucose, theplaintiff intheaction
whichitbrought beforetheCollege van
BeroepvoorhetBedrijfsleven askedfor
reimbursement oftheproduction
refunds which hadbeendeducted. It
takestheviewthattheprovisions of
Community lawupon which the
statement ofaccount isfounded are
invalid because offailure togivea
statement ofreasons andinfringement
oftheprohibition ofdiscrimination. It
alsosubmits thattherehasbeenmisuse
ofpowers andabreachoftheprinciple
oflegalcertainty.
Having regard tothearguments
submitted, whicheachofthedefendants
inthemainanions opposes, thecourts
before which thematters hadbeen
brought stayedtheproceedings andby
ordersof29July,12October and8
November 1977referred thefollowing
questions totheCourt ofJustice
pursuant toArticle 177oftheEEC
Treatyforapreliminary ruling:
I.Case103/77:
"1.IsCouncil Regulation (EEC)No
1862/76 insofarasitpurports to
insertArticle 5ainCouncil Regu-
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KONINKLIJKE SCHOLTEN-HONIG vHOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUKTEN
lation(EEC)No2742/75 avalid
regulation?
2.IsCouncil Regulation (EEC)No
1111/77avalidregulation?
3.IsRegulation (EEC)No1110/77 a
validregulation?"
II.Case125/77:
"1.Mustitbeheldthatthereasons on
whichArticle 2ofCouncil Regu­
lation(EEC)No1862/76 isbased
arenotstatedinaccordance with
therequirements ofArticle 190of
theTreaty andifsodoesitfollow
thatArticle 2—Article 5aof
Council Regulation (EEC) No
2742/75 —isnotbinding?
2.IsthesaidArticle 2incompatible
withtheprinciple ofnon-discrimi­
nation which isfundamental tothe
Treaty andwhich issetout,in
particular, inArticle 40ofthe
Treaty andisArticle 2notbinding
forthatreason?
3.Does Regulation (EEC) No
1862/76 contain anamendment to
thesystemofgranting refunds to
thestarch industry, which
amendment, either ofitselfor
because ofthefactthatitwas
suddenly introduced intothe
aforementioned system which has
beenapplicable since 1967, is
incompatible withtheprinciple of
legalcertainty fundamental tothe
Treaty andifsoisthatregulation
notbinding inwholeorinpart,
namely insofarasitmakes
provision forthesaidamendment?
4.Have theCouncil and the
Commission, byadopting Regu­
lation(EEC)No1862/76 andRegu­
lation (EEC) No 2158/76
respectively, misused theirpowers
inthat,inadopting thoseregu­
lations, theypursued objectives
otherthanthoseinherent inRegu­
lation(EEC)No2727/75, particu­
larlybecause bythoseregulations
theyintroduced theaforementionedchangeinthesystemofproduction
refundswiththeaimofhelping the
sugarindustry whichaimwasnot
andisnotproper toRegulation
(EEC)No2727/75 onthecommon
organization ofthemarket in
cereals?
5.MustArticle 4ofCommission Regu­
lation (EEC) No2158/76 be
interpreted asmeaning that,taking
accountoftheprovisions ofRegu­
lation(EEC) No1862/76, those
refunds inrespectofthemanu­
facture ofglucose withahigh
fructose content which were
grantedintheperiodfrom 1August
to3September 1976,onwhich
latterdatetheregulation entered
intoforce,mayberecovered onthe
basisoftheprovisions ofthesaid
regulation andthoseofRegulation
(EEC)No1862/76, andifso,must
itfollowthatRegulation (EEC)No
2158/76 isnotbinding inwholeor
inpart,namely insofarasitmakes
provision fortherecovery of
refunds asmentioned above?"
III.Case145/77:
Thequestion askedwaswhether Regu­
lation(EEC)No1111/77 of17May
1977isinvalid onanyandifsowhich
ofthegrounds referred tointhe
plaintiffs pointsofclaim.
BeforeIconsider thesequestions permit
mealsotomention thatthoseunder­
takings andtheBelgian company G.R.
Amylum Ν.V.have commenced
proceedings fordamages against the
Council andtheCommission. Inthese
proceedings —thecasesinquestion are
Cases 116,124,143and153/77 —the
samerulesareatissue,namely those
concerned withthelapseofthe
production refundforisoglucose and
theintroduction ofaproduction levyon
isoglucose. Itherefore thinkitwould be
rightformetoconsider alsothe
arguments putforward inthose
proceedings which arerelevant tothe
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OPINION OFMRREISCHL —CASE 125/77
question ofthevalidity oftheregu­
lationstobedealtwithinthecasesnow
beforeusintheproceedings forapre­
liminary ruling;Iamdealingwiththese
casesinmypresent opinion.
I—Imustpreface myargumentation
withabriefobservation onaquestion
ofadmissibility raisedbytheCouncil in
Case 145/77. TheCouncil doubts
whether thisreference forapreliminary
rulingisadmissible, because thecourt
making thereference hassimply
reiterated theplaintiff's complaints, that
istosay,ithasnotmadeanyselection
fromthemhaving regard tothe
arguments putforward bytheparties,
andalsohasnotstatedclearlywhich
factsinthiscasemaybeassumed to
havebeenestablished.
Evenifinfacttheimpression mightthus
begiventhattheseproceedings closely
resemble proceedings underArticle 173
oftheEECTreaty, whichbecause of
theregulatory natureoftheactsofthe
Community whichhavetobereviewed
couldnothavebeeninstituted bythe
individuals affected, Idonotinthefinal
analysis seeanyconvincing objection. It
mustcertainly beregarded asdesirable
thatarequestforapreliminary ruling
should dealthoroughly withthecircum­
stances ofthecaseandtheposition
reached inthedispute andifpossible
givethereasons whythequestions are
referred totheCourt. Butthere isno
express provision forthisanywhere and
thepresent caseisnotthefirstinwhich
theformoftheordermaking the
reference fallsshortoftheideal.Insuch
circumstances wesimply haveto
proceed onthebasisthattheproblems
raisedbytheplaintiff appeartobe
convincing totnenational courtand
thatithassubsequently made the
questions raiseditsown.Theabsence of
anyanalysis oftheparties' submissions
should nottherefore giveuscausefor
declaring thereference forapreliminary
rulinginCase145/77 —andperhaps
thereference framed inthesamewayin
Case103/77 —tobeinadmissible.II—Asfarasthecontent ofthe
questions referred totheCourt is
concerned Iwouldlikefirstofallto
dealwiththelapseoftheproduction
refund relating tothemanufacture of
isoglucose.
Inthisconnexion consideration must
firstofallbegiventoRegulation No
1862/76 whichwasadopted forthe
purpose ofamending Regulation No
2742/75, whereby theproduction
refundforproducts intended forthe
manufacture ofisoglucose wasleftfor
the1976/77 marketing yearatthe
previous year's level,andwasnot
therefore increased asitwasinthecase
ofotherproducts, andwhichprovided
thatasfromthe1977/78 marketing
yeararefund would nolonger be
granted. Furthermore Commission Regu­
lationNo2158/76 alsocontains rules
implementing Regulation No2742/75
andlaysdownthedetailed rulesforthe
recovery byMember Statesofcontri­
butions totherefund insofarasthe
manufacture ofisoglucose isconcerned.
Theorders making thereferences ask
whether thesetworegulations arevalid
andalsoforaninterpretation ofRegu­
lationNo2158/76.
1.Asfarfirstofallasvalidity
concerned thereisthusinessence only
onematter toconsider since—onthe
whole—inthecaseofRegulation No
2158/76 nospecific reasons havebeen
advanced foritsinvalidity. Inthe
plaintiffs' viewRegulation No2158/76
would havenomeaning ifArticle 2of
Regulation No1862/76 wasprovedto
beinvalid. Whenexamining thevalidity
ofRegulation No1862/76 thereare
formal andmaterial aspects tobe
considered.
(a)Theformalvalidity oftheregu­
lation iscalled inquestion onthe
grounds thatthestatement ofthe
reasons uponwhichitisbasedisinad­
equate, thatitmakesnoreference tothe
opinion oftheEuropean Parliament
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KONINKLIJKE SCHOLTEN-HONIG vHOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN
whichisrequired underArticle43(2)of
theEECTreaty andthatisoglucose
manufacturers were notproperly
consulted before itsadoption. The
following aremydetailed observations
onthisargument:
(aa)Theplaintiff inthemainaction,
which ledtothereference inCase
125/77, takes theviewthatthe
statement ofreasons cannot besaidto
beadequate evenonthebasisofthe
requirements ofthejudgment of13
March 1968inCase5/67 W.Beus
GmbH&Co.vHauptzollamt München
[1968]ECR83,according towhichin
thecaseofaregulation morecannot be
expected thananindication ofthe
general situation andofthegeneral
objectives whichitseekstoattain.It
cannot alsobesaidinthepresent case
thattheobjectives aretobeinferred
fromtherulesrelating totherefund,
contained inRegulation No2742/75,
sinceRegulation No1862/75 doesnot
refertothesaidregulation butis
intended toamend it.Furthermore itis
important tonotethattherefundpolicy
hassince1967applied indiscriminately
toallstarch manufacturers andthatit
canbeinferred neither fromtherecitals
inthepreamble toRegulation No
2727/75 —reference ismadeinthis
preamble totheparticular situation of
thestarch market —norfromArticle
11thereof thatadistinction canbe
madeaccording totheendproducts.
Having regard tothissituation the
reasons fortheabrupt change inthe
refund policy, which occurred when
Regulation No1862/76 wasadopted,
oughttohavebeengivenandfullparti­
culars should havebeensupplied to
explain whyisoglucose hadbeenmade
anexception andwhyinthisconnexion
eventhecomplete abolition ofthe
production levywasdeemed toberight.
Inanswer tothistheCouncil andthe
Commission callattention tothefact—
interaliabyreferring totheopinion in
Case78/74Deuka, Deutsche KraftfutterGmbH B.J.StolpvEinfuhr- und
Vorratsstelle fürGetreide undFuttermittel
[1975]ECR421,atp.435—thatin
thecaseoflegislative measures the
requirements forcarrying outtheduty
togiveastatement ofreasons areless
stringent ifpartofanentiresystem is
underconsideration. Onthispointitis
important tobearinmindthatRegu­
lationNo1862/76 isoneofaseriesof
regulations. However theobjectives of
thatregulation, insofarastheycanbe
inferred frombasicRegulation No
2727/75 andRegulation No2742/75,
makeitimmediately clearwhythereis
noquestion ofaproduction refundfor
themanufacture ofisoglucose. Fur­
thermore itmustnotbeforgotten —
andthisreferstotheargument thatthe
Community hasabruptly altered its
consistent refund policy —that
isoglucose isanewproduct, whichonly
appeared onthemarket inappreciable
quantities in1976,andthatsince1974
therehavebeenindications ofefforts to
abolish therefunds oratleasttoreduce
themconsiderably.
Withreference tothisargument itmust
firstofallbeconceded thattherecitals
inthepreamble toRegulation No
1862/76 arenotinfactdrawn upin
greatdetail;theyactually contain the
following:
"whereas however, giventheobjectives
oftheproduction refund system, such
anincrease should notberetained in
thecaseofproducts usedinthemanu­
facture ofglucose having ahigh
fructose content."
However ontheonehandIamofthe
opinion thatwhatwassaidinconnexion
withthedecision nottoincrease the
refundmustnaturally applytoitslapse,
thatthereasons inthepreamble
therefore formalogicalentity.Onthe
other handItaketheviewthatthe
reference totheobjectives oftherules
relating totherefund issufficient ifone
follows thearguments intheAdvocate
General's opinion inCase78/74 and
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OPINION OFMRREISCHL —CASE 125/77
therelevant case-law todate(judgment
of13March 1968inCase5/67W.Bern
GmbH&Co.vHauptzollamt München
[1968]ECR83;judgment of20June
1973inCase80/72N.V.Koninklijke
Lassiefabrieken vHoofdproduktschap
voorAkkerbouwprodukten, [1973]ECR
635;judgment of18March 1975in
Case78/74Deuka, Deutsche Kraftfutter
GmbH B.J.StolpvEinfuhr- und
Vorratsstelle fürGetreide undFuttermittel
[1975]ECR421andjudgment of23
February 1978inCase92/77AnBord
Bainne Co-operativeLimited vThe
Minister forAgriculture, notyet
published). Inthisconnexion boththe
basicRegulation No2727/75 andRegu­
lationNo2747/75 havearoleandit
mustberegarded asimmaterial thatthe
objectives oftherulesrelating to
refunds aremainly indicated inRegu­
lationNo2747/75, which hadtobe
amended byRegulation No1862/76,
theonerelevant intheseproceedings.
Thepreamble toRegulation No
2727/75 referstothespecial market
situation forstarch, whichmightmake
theproduction refund appear tobe
appropriate. Itcannodoubtbeinferred
fromthisthatrefunds forthemanu­
facture ofisoglucose havenotbeen
included intheobjectives oftherules,
sinceisoglucose, evenifitisobtained
fromstarch, beingasweetener inthe
proper senseofthatword,doesnot
form,partofthestarchmarket. The
preamble toRegulation No2742/75 is
evenclearer. Itstates thatthere isa
special situation onthemarket in
starches andthatthestarchindustry
must ensure thatitsprices are
competitive withthoseofsubstitute
products. Inthisconnexion special
reference ismade tocompetition
between maize starch, riсеstarch,
potato starch andsubstitute chemical
products However ifthecreation ofthe
capacity tocompete withtheproducts
ofthechemical industry, especially the
petrochemical industry, whichcanbuy
rawmaterials cheaply ontheworldmarket, canbefoundtobetheprincipal
justification fortherulesrelating to
refunds, itmustaccordingly followthat
refunds forisoglucose, which isnot
exposed, ornotyetexposed, toalarge
extenttosuchcompetition, werenot
included inthesystemestablished bythe
rules.
Inthesecircumstances theexclusion of
isoglucose fromtherulesrelating to
refunds didnotinfactcallforany
specialjustification andthevalidityof
Regulation No1862/76 cantherefore
scarcely becalledinquestion with
reference totherequirements ofArticle
190oftheEECTreaty.
(bb)Furthermore oneoftheplaintiffs
notestheabsence inRegulation No
1862/76 ofanyreference toanopinion
oftheEuropean Parliament tobegiven
inaccordance withArticle 43(2)ofthe
EECTreaty. Itconsiders thatsuchan
opinion isnecessary because thesaid
regulation isnottoberegarded asa
rulefortheapplication ofArticle 11of
Regulation No2727/75 within the
meaning ofthatArticle. Infactithas
exceeded thelimitsoftheauthorization
granted inthatarticle, sinceArticle 11
mentions production refunds forspecific
products quitegenerally, anddoesnot
provide thattheCouncil mayadopt
different rulesaccording totheusefor
whichthestarchwasintended.
Itishowever scarcely possible toaccept
thislineofthought either.Inthefirst
placewithintheframework ofoptional
rulesrelating tothelevy,asinRegu­
lationNo2727/75, itseems quite
obvious thattheCouncil mustbeable
withinthecontext oftheimplementing
ruleswhich ithastoadopt to
differentiate between endproducts. This
cannot —ifatoonarrow definition of
theconcept of"implementing rules"is
tobeavoided andinthisconnexion I
referinteraliatothejudgment of30
October 1975inCase23/75ReySodav
CaisaConguaglio Zucchero [1975]ECR
1279—beregarded asafundamental
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KONINKLIJKE SCHOLTEN-HONIG vHOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUKTEN
changeofpolicyinthefieldofrefunds
onwhich theother Community
institutions hadtobeconsulted. Further­
morereference canbemadetowhathas
already beenstatedaboutthemeaning
andpurpose oftherulesrelating to
refunds. Thusitemerges fromthe
recitals inthepreamble toRegulation
No2727/75 thattherulesrelating to
refunds havebeenlaiddownwithdue
regardtothespecialsituation whichisa
feature ofthestarchmarket. Thatseems
tojustifycompletely theexclusion from
therulesofproducts further processed,
which arenotincluded inthismarket.
Suchaformulation oftherulesrelating
totherefund inotherwords accords
withtheirobjectives andforthatreason
mustfallwithinthecategory ofwhat
aretoberegarded asrulesforthe
application ofArticle 11ofRegulation
No2727/75.
Sincenoprovision hasbeenmadefor
consulting Parliament onthe
implementing ruleswithin themeaning
ofArticle 11ofRegulation No2727/75
andofArticle 9ofRegulation No
1418/76 —theseprovisions laidthe
foundation fortheadoption ofRegu­
lations No2742/75 andNo1862/76 —
thefactthatParliament's opinion was
notobtained doesnotconduce tothe
invalidity ofRegulation No1862/75.
(cc)Finally thesameapplies the
argument that theCommunity
institutions wrongly failedtoconsult the
glucose manufacturers beforeadopting
theregulations whicharecriticized.
Onthisparticular pointitsuffices to
pointoutthattheTreaty doesnot
provide forsuchconsultation andthat
thereisnocorresponding legalprinciple
—atallevents when legislative
measures arebeingtaken.Furthermore
contact wasdefinitely maintained with
theinterested parties. Itwasstated
during theproceedings, without being
challenged, thatsinceJune1976there
hasbeenanexchange ofviewswiththe
starch manufacturers andmention wasmadeofavisitbyofficials toan
isoglucose factory. Thisthereby ensured
thatsomeeffectatleastwasgivento
theinterests oftheparties concerned
before thenewrulesrelating tothe
refund weresettled.
(b)Inaddition thevalidity ofRegu­
lationNo1862/76 isalsochallenged
upongrounds relating tosubstantive
law.Inthisconnexion therearethree
grounds toconsider:
—Infringement oftheprohibition of
discrimination,
—Disregard oftheprinciple oflegal
certainty, byreasonoftheabsence
ofanytransitional rules,
—Misuseofpowers.
(aa)Theisoglucose manufacturers feel
thatcompared withstarch manufac­
turers,whocontinue tobenefitfromthe
production refund, theyhavebeen
discriminated against, andinthis
connexion theyalsohaveinmindthe
effectsofthenewrulesrelating tothe
refund onby-products suchasfeeding
stuffsandcornoil.Theytaketheview
thatitisnotpermissible todrawa
distinction according towhether thereis
competition withchemical substitute
products. They make thefurther
submission thattherulesprovide for
discrimination within thegroupof
products which areexposed tothe
competition ofnon-chemical products
andreferinthisconnexion tothefact
thataproduction refund continues to
begranted forthemanufacture of
glucose.
Ishould likeforthemoment toleave
openthequestion whether theobjection
canberaisedagainst thesearguments
thattheproducers ofisoglucose and
starcharethesameundertakings and
thattherecannot therefore besaidtobe
discrimination against different
producen, because ourconsiderations
mustatleastbebased oneconomic
units.Iwillexamine thisproblem in
another connexion, thatistosay,the
2015

OPINION OFMRREISCHL —CASE 125/77
question whether attention mustnot
moreappropriately befocused onthe
products andtherelations between them
inthefieldofcompetition.
Forthepurpose ofevaluating the
complaint ofdiscrimination itisnow
sufficient toreferprimarily tothe
principal objective, which hasalready
beenmentioned, oftherulesrelating to
therefund asexpressed forthefirsttime
inRegulation No1955/75. According
tothatregulation starchmanufacturers
should beenabled tomeet the
competition ofchemical substitute
products. Isoglucose manufacturers are
notinsuchasituation, thecompetition
ofchemical products (cyclamates) only
beingforthemverymuchofsecondary
importance. Itmaytherefore besaid
thattheexclusion ofisoglucose from
therulesrelating totherefundappears
tobejustified having regardtothe
meaning andpurpose oftherules,and
furthermore ithasnotbeenshown that
thetermsofitsexclusion havebeentoo
narrowly drawn.
Furthermore therecannot alsobesaid
tobeanydiscrimination against starch
manufacturers because isoglucose and
starcharenotproducts whichcompete
witheachother. Inthisconnexion
naturally themainproducts aretaken
andnotforinstance theby-products
which arealsoobtained inthemanufac­
turingprocess andconsequently benefit
indirectly fromtherulesrelating tothe
levy.
Moreover asfarasconcerns the
reference tothefactthatrulesrelating
totherefundcontinue toapplyintheir
unamended formtoglucose manufac­
turers,itisalsoimportant tobearin
mindinthisconnexion thatisoglucose
andglucose arenotnormally in
competition witheachother.Inany
caseitseemstometobeconvincing
thatowing totheconsiderable
difference inthesweetening properties
eachproduct mustbeassumed tohave
itsseparate fieldofapplication andthatconsequently theinterchangeability
which isaprerequisite ofthe
prohibition ofdiscrimination isabsent.
Finally inthisconnexion the
Community institutions have also
pointed out—thisconsideration alsois
relevant inthecontextoftheprinciple
ofequality oftreatment —thatitwould
havetobesaidthattherewasdiscrimi­
nation against sugarmanufacturers if
isoglucose manufacturen wereto
continue tobenefitfromtheproduction
refund.
Consequently therulesrelating tothe
refund also cannot therefore be
regarded asinvalid because theyhave
provided fordifferent treatment of
isoglucose products.
(bb)Theapplicants, inreliance onthe
principle oflegalcertainty, also
complain thatwhentheproduction
refundforisoglucose production was
abolished theexisting capacities, in
whichcapiul hadbeeninvested before
theadoption ofRegulation No
2727/75, werenottakenintoaccount
andthatneither transitional rulesnor
compensatory measures wereadopted.
There weregrounds fordoing so,
namely thattherehadbeenproduction
refunds since1967,thattherehadbeen
noannouncement thattherefund in
respectofthemanufacture ofproducts
competing withnon-chemical products
mightbediscontinued andalsothatno
indication could havebeeninferred
fromRegulation No2727/75 ofany
changeintherefundpolicy.
However theCommunity institutions
answer thiswithgood reason by
pointing outthatacertain formof
transitional ruleswasadopted inthat
therefundforthe1976/77 marketing
yearcontined attheoldrate.Having
regard tocurrent agreements and
commitments todeliver which hadbeen
enteredintothiscouldinfanappearto
besufficient. Therewerescarcely any
grounds formeasures ofadjustment or
compensatory measures goingbeyond
this.
2016

KONINKLIJKE SCHOLTEN-HONIG vHOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN
Indeed ifattention isfocussed onthe
refund ruleswhichoriginaly applied—
according toArticle 11ofRegulation
No120/67theywerenotoptional —it
isofprimary importance thataccording
totherecitals inthepreamble tothe
regulation theywereadopted becauseof
thespecialsituation onthemarket in
cerealandpotato starches andofthe
needtokeeppricesforthoseproducts
competitive withpricesforsubstitute
products. When these ruleswere
introduced no-one eventhought of
products suchasisoglucose whichdo
notbelong tothestarchmarket and
alsodidnotarrive onthemarket in
appreciable quantities until1976.On
theother hand theCommunity
institutions havecorrectly pointed out
thatundertakings whichmanufacture a
product thatcompetes withsugarand
werefamiliar withthemarket insugar
andstarchproducts hadfromthevery
beginning tobeprudent whenmaking
capital investments. Theycouldnotin
factassume thatasetofruleslaiddown
mainlyforotherpurposes wouldremain
unamended inasectorwhichmight
createdifficulties forthesugarmarket
andtherewasevenlessjustification for
thisassumption astherefundpolicyhad
anywayundergone substantial change
inrecentyears.Acommunication ofthe
Commission intheBulletin ofthe
European Communities (Supplement
17/73, p.14)hadinfactalready
mentioned thenecessary amendments
andadjustments.
Ifontheother hand attention is
focussed onalaterperiod when
considerable quantities ofisoglucose
arrived onthemarket, itisthen
important tonotethattherulesrelating
totherefund, ascanbeclearlyinferred
fromRegulation No665/75, wereonly
optional atthattime.Moreover itwas
quiteclearthatforthisperiod the
refund wasintended —thisemerges
fromtherecitals inthepreambles to
Regulation No1955/75 andRegulation
No2742/75 —tomakestarchproductscompetitive withsynthetic substitute
products. AsIhavealready mentioned
thisprerequisite didnotapplyto
isoglucose. Noonecouldtherefore rely
ontheoptinal rulesrelating torefunds
beingmaintained inforcejustfora
productofthatkind.
Fromthestandpoint alsooflegal
certainty theexistence ofadefectwhich
mightmakeRegulation No1862/76
appear tobeinvalid cantherefore
hardlybeestablished.
(cc)Thecomplaint ofmisuse of
powerswhichstillhasalsotobedealt
withinthisconnexion isfounded onthe
argument thatRegulation No1862/76
wasadopted within theframework of
theorganization ofthemarkets in
cerealsandthatthismeansthattheregu­
lation could onlypursue objectives
whichwereconnected withthatmarket
organization. Butinfact—ascanbe
inferred fromRegulation No1111/77—
itwassupport measures forthesugar
industry that were involved.
Considerations which apply to
competition between isoglucose and
sugarmustberegarded ashaving no
relevance toruleslaiddown forthe
implentation ofthecommon organi­
zation ofthemarket incereals.
Measures benefiting sugar producers
couldonlyhavebeenproperly adopted
within theframework ofthecommon
organization ofthemarketinsugar.
TheCommunity institutions, inmyview
convincingly, countered theseinferences
withtheassertion thatthemainreason
foradopting Regulation No1862/76
wasthatthey recognized that
subsidizing isoglucose wasincompatible
withthefundamental aimsoftherules
relating totherefund. Sincesuch
considerations concern theveryessence
oftherulesrelating totherefundthey
infactfallwithin thescopeofthe
common organization ofthemarket in
cereals. However inaddition tothisthe
viewalsoseemstometobetenable that
whenadopting agricultural measures —
2017

OPINION OFМRKEISCHL —CASE 125/77
andimplementing ruleslaiddown
pursuant toAnide 11ofRegulation
No2727/75, whichinthefinalanalysis
hasitsorigininArticle43oftheTreaty,
aresuch measures —itmust be
considered lawfultotakeintoaccount
theeffectonsectors otherthanthose
directly considered, andinthepresent
caseseventhefactthattheretention of
theproduction refund inthecaseof
isoglucose would haveamounted to
discrimination against sugarmanufac­
turers. Finally theCommunity
institutions couldinjustification oftheir
assenion alsorefertothecase-law of
theCourt andinparticular tothe
judgment of21December 1954inCase
1/54Government oftheFrenchRepublic
vHighAuthority oftheEuropean Coal
andSteelCommunity (Rec.1954-55, p.
7).Inthatcaseitwasheldinconnexion
withtheconcept "misuse ofpowers"
thatwhere adecision pursues morethan
oneaim,evenifanunjustified ground is
included among thevalidones,this
would notmakeitinvalid formisuseof
powers, provided thatitdoesnot
abandon attainment ofthemainaim.It
ismyimpression thatthisisatleastthe
caseintheseproceedings.
(c)Allthings considered Ican
accordingly statethatnoneofthe
arguments putforward during the
proceedings warrants theconclusion
thatRegulation No1862/70 andasa
result Regulation No2158/76 are
invalid.
2.Afterthatforthepurpose ofinter­
preting Regulation No2158/76 —part
oftheexamination ofitsvalidity must
nodoubt alsobecarried outÍroma
particular angle—thefollowing brief
observations mustbemadeattheendof
thisfirstsectionofmyinvestigations:
Article 4oftheregulation expressly
statesthatitshallenterintoforceon3
September 1976,butshallapplyfromI
August 1976Itfollows quiteclearly
fromthisthatpursuant toRegulationNo2158/76 production refunds for
isoglucose, whichweregranted during
theperiod from 1August to3
September 1976, arealsotobe
recovered.
Itisinanycasedearthatthereareno
legalmisgivings duetothisregulation
havingretroactive effectwhichmilitate
againsttheadministrative rulesofRegu­
lationNo2158/76 beingappliedinthis
way.Infactthereisnogenuine retro­
activitywhichmighthavehadtheeffect
ofimposing unexpected burdens upon
theparties concerned. Asthe
Commission hasrightlyobserved thisis
quitesimply duetothefactthatthe
leveloftherefundandconsequently the
amount recoverable havealready been
laiddowninRegulation No1862/76
whichentered intoforceon1August
1976andthatthedirection tothe
Member States totheeffectthatthe
amounts oftherefund, asfarasthey
concern isoglucose andexceed the
permissible limit,aretoberecovered
canalsocertainly beinferred fromthis
regulation. This isconclusive in
deciding thematterandasagainst this
thequestion howtherecovery istobe
effected technically inlawisofminor
importance.
III—Icome nowtothesecond
sectionofmyexamination whichhasto
dealwiththevalidity ofRegulations
Nos1110/77 and1111/77. Theseregu­
lationstookisoglucose outoftheorgani­
zationofthemarket insugarand
introduced aproduction levyonit.In
thisconnexion itisimportant tonote
thatthelevyfixedinthefirstinstance
foraperiodofoneyearforisoglucose
atalowerlevelthanforBsugar—
namely fiveunitsofaccount per100
kg—,pursuant toarecently adopted
decision oftheCouncil, shallapplyuntil
theexpiryoftherulesrelating toquotas
oftheorganization ofthemarket in
sugar,thatisuntil1980.
2018

KONINKLIJKE SCHOLTEN-HONIG vHOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN
1.Inthisconnexion itis,Ifeelsure,
appropriate firsttoassemble some
economic factswhich could notbe
considered attheoutset andwhich are
ofimportance inexamining the
arguments putforward bytheplaintiffs
inthemainactions against thevalidity
ofthesaidregulations.
Firnofallasfarasconcerns the
Community sugar market, following
several yearswhensugarwasscarceon
itandalsoontheworldmarket, itsown
production, towhichareaddedimports
atguaranteed pricesfromAfrican,
Caribbean and Pacific countries
amounting toabout 1.3million tonnes
infulfilment ofobligations underthe
Lomé Convention which remains in
forceuntil1980,hasbeenlargein
recent marketing years. Thesugar
market isconfronted withstagnant or
evenfallingsugarconsumption whichat
about9.3million tonnesperyearisin
theregion ofthebasic quota.
Consequently the1976/77 marketing
yearproduced surpluses of1.7million
tonnes inspiteofsmallyieldsper
hectare attributable tothedrought. In
the1977/78 marketing year,withthe
production ofwhitesugarreaching
11.086milliontonnes—notcounting C
sugar—andtaking account ofACP
sugarimported intotheCommunity, a
surplusof2.6to2.7million tonnes isto
beexpected. Insuchcircumstances and
inviewofthefallinworld prices
considerable sumsofmoney areneeded
tofinance exports: thusinthe1977/78
marketing yearthecostwasfirst
calculated at240to250unitsof
account pertonneandrecently at220
unitsofaccount pertonne.Theeffect
ofthesurplus isalsothatmarket prices
areapproximately thesame asthe
intervention prices oronlyslightly
abovethem.
Asfarasisoglucose isconcerned the
production capacities, expressed in
whitesugarequivalents, attheendof
1976havebeenestimated byone
plaintiff at70000tonnes, bytheCommunity institutions andthestarch
manufacturers at150000tonnes andat
theendof1977bytheplaintiffs at
160000tonnes and380000tonnes
respectively, bytheCommunity
institutions at400000tonnes. The
Community institutions alsoexpect a
further increase ofabout 700000or
even 1000000tonnes by1980,in
answer towhichtheplaintiffs express
theopinion thattheexpansion of
production capacities isalready slowing
down because ofthelapseofthe
production levy.Infactfromthemiddle
of1976tothemiddleof197775000to
88000tonnes ofisoglucose were
produced —calculated onthebasisof
thedrymatter—whichcorresponds to
about2to3%oftheentireproduction
ofstarch.Oneplaintiff gaveasitsactual
sales 112000tonnes for1977and
154000tonnesfor1978.
Isoglucose arrives onthemarket in
liquidform.Thiscanbeseenasadisad­
vantage because ithastobekeptata
particular temperature andismore
difficult andexpensive totranspon than
sugar. Theadvantages enjoyed by
isoglucose werestatedtobeinteralia
thatitisrichinnatural fructose and
colourless, thatithasaneutral taste
whichbringsouttheflavour offruits
andhasahighdegreeofsolubility and
thatwhenitisstoreditisnotexposed
totheriskofinfection frommicrobes.
Thepriceofisoglucose isclearly
dependent uponthepriceofsugarbut
appears tobeafewpercentbelowthe
priceofliquidsugar;figures of5to
7%oreven 10to13%havebeen
mentioned. Inthisconnexion thedisad­
vantages which havebeenmentioned
andthefactthatisoglucose isanew
product arerelevant. Furthermore in
thiscontext attention wasdrawn tothe
somewhat lowersweetening properties,
whicharehowever disputed, andtothe
factthattwomaterials havetobestored
simultaneously bythemanufacturers,
thespecific reasons being that
isoglucose isregularly mixedwithsugar
2019

OPINION OFMRREISCHL —CASE 125/77
andthatinteraliathesweetening prop­
ertiesaregreaterifthereisamixture
thanwould bearithmetically expected.
Itisnotdisputed thatisoglucose can
onlyreplace sugarintheindustrial field
which accounts forabout halfof
consumption. Towhatextentisoglucose
isexpected tooustsugarfromthisfield
remained ofcourse acontroversial issue.
Theisoglucose manufacturers adhereto
theviewthatatthepresent timethereis
amarketforliquidsugarof700000
tonnesandthat,sincetheproducts have
tobemixed, abouthalfofitcanbe
takenupbyisoglucose. Theirviewis
that,lastbutbynomeans least,for
reasons oftasteisoglucose isonly
expected tobeusedinthedrinks
industry andalsogenerally inlarger
concerns andtheybelieve —also
because theuseisrestricted inpartby
administrative provisions —that
isoglucose inthelongertermwillonly
replace about 7%ofsugar
consumption. The Community
institutions ontheother handsubmit
thattheliquidsugarmarket isnotthe
onlycriterion sincepanofthesugar
bought bytheindustry issolidsugar
whichitliquifies itself.Theypointout
thattheuseofliquidsugarisonthe
increase —intheUnited Kingdom it
already accounts for 16%of
consumption —andthatitiscertainly
notessential, especially inthedrinks
industry, tomixisoglucose withliquid
sugar.Theytherefore expectthatinthe
longtermisoglucose willhaveashare
ofupto30%ofthesugarmarket.This
estimate hasbeenconfirmed ina
measure byapaperproduced duringthe
proceedings andindicating thatmore
than2million tonnesofsugarwillbe
replaced inWestern Europe by
isoglucose aresimilar—against which
mustbesetanother nudygiving a
figureintheorderofonemilliontonnes
andaforecast byasugarmanufacturer
ofanisoglucose marketof1.5million
tonnes.Finally mention mustalsobemadein
thisconnexion ofthefactthat
according tothestatements ofthe
Community institutions isoglucose is
manufactured intheCommunity byfive
orsixmodem undertakings ofthemost
convenient sizeandinthebenpossible
locations. Ontheotherhandsugar
manufacturing inthe 1976/77
marketing yearwasspread over100
undertakings withmorethan200
factories. Mostofthemarenearareas
wheresugarbeetiscultivated, someare
oldandsmallandtheircompetitive
capacity —depending ontheregion
andtheharvest—variesconsiderably.
2.IfInextturntotheexamination of
theregulations mentioned justnow—
Regulation No1110/77 whichtook
isoglucose outoftheorganization of
themarketinsugarhasnosignificance
inthisconnexion onitsown—thefirn
question which might beraised is
whether theproduction levyon
isoglucose affects themanufacturers
concerned atall.Therearegrounds for
doubting whether itdoesinviewofthe
assertion ofsomeoftheplaintiffs that
thelapseoftheproduction levyitselfis
making themanufacture ofisoglucose
unprofitable andforcing themtostop
production. Ifthiswerethecase,if
isoglucose therefore werenolonger
beingmanufactured because ofthelapse
oftheproduction refund, therules
relating tothelevieswouldinfactnot
applyandconsequently thequestions
relating thereto wouldbeirrelevant.
Nevertheless itseemstomethatfor
various reasons thereisnojustification
forbreaking offtheexamination atthis
pointonthatground.
Onesuchreason isthatishasnotsofar
beenclearly established thatthe
consequence indicated —cessation of
production —isboundtoflowsolely
fromthelapseoftherefund. The
plaintiff Amylum hasnotadduced any
evidence tothiseffenandtheplaintiff
Tunnel Refineries onlymentions a
2020

KONINKLIJKE SCHOLTEN-HONIG vHOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN
declineinprofilsduetothelapseofthe
production refund. Finally nocircum­
stances exist which threaten an
immediate cessation ofproduction; if
theworstcametotheworstthiswould
onlybesomething tobefearedinthe
future, should longtermmarket
conditions without arefund notallow
isoglucose tobemanufactured prof­
itably.Ifhowever itcannotthusatthe
presenttimebesaidforcertainthatthe
rulesrelating totheleviesarenota
matterofimportance toisoglucose
manufacturers thentheexamination of
thequestions ofvalidity referred tous
cannot beabandoned.
3.Whenexamining thereasons put
forward toestablish theinvalidity of
Regulations No1110/77 andNo
1111/77 Iwillfirstofallconsider once
againtheformalcomplaints.
(a)Thusoneoftheplaintiffs drew
attention totheopinion ofthe
European Parliament (Official Journal
1977,C93,p.14)whichshowsthat
Parliament thought itadvisable to
extend toisoglucose thetreatment
applicable tosugar.Intheviewofthis
plaintiff theCommunity legislature is
obliged according toArticle 190ofthe
EECTreaty togiveastatement ofthe
reasons whyithasnotacteduponthe
opinion. There isnosuchstatement of
reasons inthepresent cases.
Inmyviewwecannot accept this
argument. Thepredominant reasonfor
thisisnotsomuch thefactthatthe
Council hasnotcompletely disregarded
theopinion oftheEuropean Par­
liament; thedecisive factor onthe
contrary isthat,although thedutyto
consult islaiddownbyArticle 43ofthe
Treaty, itcertainly doesnotfollowthat
theopinion givenmustbeconsidered or
thatifitisdisregarded specific reasons
forthismustbestated.Thispointwas
settledearlyonbythecase-law ofthe
Court insimilar circumstances inthe
context oftheTreaty establishing theEuropean CoalandSteelCommunity
(cf.Case4/54Associazione Industrie
Siderurgiche Associate (I.SA.) vHigh
Authority oftheEuropean CoalandSteel
Community (Rec.1954-55, p.177)).
Thesamemustnaturally applyinthe
fieldcovered bytheEECTreaty.
(b)Inconnexion alsowiththeintro­
ductionofaproduction levythereisa
further complaint thattheisoglucose
manufacturers were notconsulted
beforehand.
Onthisandalsothecorresponding
complaint concerning Regulation No
1862/76 itmustbenotedthatnosuch
obligation existsundertheTreaty.Furth­
ermore weknowthat,ontheonehand,
there were contacts between the
Community institutions andthebranch
ofindustry affected —therewasa
meeting intheautumn of1976,the
minutes ofwhichhavebeenproduced,
andaccording totheCouncil's
statements there was extensive
correspondence fromJune1976toMay
1977 between theCommunity
institutions andtheundertakings
concerned andalsoavisitbyofficials of
theCommission toanisoglucose
factory. Ontheother handitis
important tobearinmindinthis
connexion thattheEconomic andSocial
Committee which hasthespecific
function oftakingdueaccount inthe
legislative processoftheinterests ofthe
business circlesinvolved wasinanycase
consulted. (Official Journal 1977,C77,
p.18).
Regulations Nos1110/77 and1111/77
cannot therefore besaidtobevitiated
byanyformalandprocedural defects.
4.Theexamination ofthesubstantive
arguments submitted concerning the
validity ofthetwosaidregulations is
moredifficult andcovers awiderarea.
(a)Inthisconnexion Iturnfirstofall
tothequestion whether theCouncil
couldadoptRegulation No1111/77,
which isexpressly basedonArticles 42
2021

OPINION OFMRREISCHL —CASE 125/77
and43oftheTreatyandreferstothe
objectives ofArticles 39,asameasure
relating toagricultural policyor
whether itcanbesaidagainst thisthat
isoglucose isnotanagricultural product
withinthemeaning oftheTreaty.
Inthisconnexion oneoftheplaintiffs
reliesontheopinion oftheEuropean
Parliament which hasalready been
mentioned and which describes
isoglucose asanindustrial product. It
alsoreferstothedefinition ofagri­
cultural products inArticle 38ofthe
Treatywhichonlyincludes products of
first-stage processing. Isoglucose which
isproduced bysecond-stage processing
doesnotfallwithin thisdefinition and
AnnexIItotheTreatyprovides nohelp
either,forawideinterpretation ofthis
Annexcannotturnagricultural products
intoindustrial products.
Whenconsidering thisquestion itisin
myviewimportant tobearinmindthat
isoglucose fallswithintariffheadings
17.02 and17.05oftheCommon
Customs Tariff.Noproblems ariseon
thisaccount inthecaseofthefirsttariff
heading because from thevery
beginning itwassetoutinAnnexII.
Asfarasconcerns tariffheading 17.05
itistruethatitwasnotinserted inthe
listinAnnexIIuntiltheadoption of
Regulation No7aoftheCouncil of18
December 1959(Official Journal,
English Special Edition 1959-1962, p.
68).However inmyviewArticle 38is
tobeinterpreted insuchawaythat
paragraph (3)thereof aswellasAnnex
IItotheTreaty areinvariably
considered intheversion fromtimeto
timeinforce.Furthermore ithasbeen
established bythecase-law oftheCourt
(judgment of29May1974inCase
185/73 Hauptzollamt Bielefeld vOffene
Handelsgesellschaft inFirmaH.C.König
(1974] ECR607)thatthenumber of
operations isnotthecriterion for
determining theconcept "first-stage
processing" andthattheratiobetween
thecostofthebasicproduct andtheprocessed product isamaterial factor.
However sinceinthecaseofisoglucose,
aswehaveheard,thecostsoftheraw
materials account for50%oftheentire
coststherecanindeedbescarcely any
doubtthatwithinthemeaning ofthe
Treaty isoglucose isanagricultural
productoffirst-stage processing and
thattheCommunity institutions are
accordingly empowered tolaydown
rulesinthecontextofTideIIonAgri­
cultureoftheTreaty.
Itmustbenotedinconnexion withthe
viewputforward byoneplaintiff,
namely thatinthecaseofprocessed
products theprocedure prescribed by
Article 235oftheTreatyoughttohave
beenadopted, thattheCommunity
institutions couldsafelyhaverecourse
toArticle 43oftheTreaty. Inanycase
theCouncil's contention thatitmustbe
possible tointroduce acharge under
Anide 43ifthereisalready achargeof
thiskindoncompeting products seems
tometobetenable inthisconnexion.
(b)Itwasthenalsosubmitted thatthe
revenue fromtheproduction levyon
isoglucose couldnotbetreated as"own
resources" within themeaning of
Council Council Decision of21April
1970(Official Journal, English Special
Edition 1970(I),p.224),sinceneither
therequisite conditions, ofsubpara­
graphs (a)or(b)norofthelast
paragraph ofArticle 2arefulfilled. It
follows thatthecontribution cannot be
usedforfinancing sugarexports; the
objective which itsought toattain
cannot therefore beachieved andfor
thatreason alonelevying itmustbe
regarded asunlawful.
Thisargument alsoseemstometobe
unconvincing. Itmust,Iadmit, be
conceded thatinthepresent cases
Article 2(b)ofthesaidCouncil
decision, whichonlyappliestocustoms
duties, andthelastparagraph ofthat
article, which makes compliance with
theprocedure prescribed byArticle 201
oftheTreaty aprerequisite, donot
2022

KONINKLIJKE SCHOLTEN-HONIG vHOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUKTEN
apply.However Idonotconsider that
oneneedhaveanyqualms about
invoking Article 2(a)withreference to
thelevyonisoglucose. Inthisarticle
appears thevery wide-ranging
expression "within theframework of
theorganization ofthemarkets in
sugar" according towhichIimagine
evenaverycloseactualconnexion with
thisorganization ofthemarket should
suffice. Inthiscontext onepointof
interest isthatisoglucose wasincluded
originally intheorganization ofthe
market insugarandtakenoutofit
because aspecial setofruleswas
adopted forit.Furthermore thelevyon
isoglucose, ascanbeinferred fromthe
recitals inthepreamble toRegulation
No1111/77,isspecifically designed to
finance exportsofsurpluses whichcome
ontothesugarmarket. Accordingly the
levyonisoglucose should betreated as
"ownresources" withinthemeaning of
theCouncil decision, anditistherefore
plainthatitsuseforthesaidpurpose
certainly doesnotcomeupagainst any
legalobstacles arising outofthe
financial system.
(c)Inthethirdplacetheargument
thattherulesrelating tothelevieson
isoglucose areincompatible withthe
objectives ofArticle 39oftheTreaty
mustbeexamined.
Theplaintiffs' mainsubmission in
support ofthisargument isthatbecause
thelevyleadstotheproduction of
isoglucose being stopped, technical
progress withinthemeaning ofArticle
39(a)oftheTreaty isimpeded, andby
nomeanstheleastoftheconsequences
ofthisisthattheeffectbothonthe
workforceinisoglucose factories and
onthatpartoftheagricultural
Community which produces the
necessary rawmaterials forthemanu­
factureofisoglucose hasnotbeentaken
intoconsideration. Themeasure also
runscounter totheobiective inArticle
39(d)oftheTreaty sinceisoglucose
canhelptoassure theavailability ofsupplies whensugar isscarce by
stabilizing themarket. Furthermore the
isoglucose regulation, which infact
increases prices, hasdisregarded the
objective ofensuring thatsupplies reach
consumers atreasonable prices(Article
39(e)).However ithasnotbeenshown
ineachcasethatdisregarding these
objectives inordertopursueanother —
theCommunity institutions asweknow
referprimarily tothestabilization ofthe
market—isessential.
Itisinmyviewadvisable atthe
beginning oftheexamination ofthis
complaint torecallthatthedecided
casesoftheCourt haverepeatedly
stressed thatalltheobjectives ofArticle
39cannot bepursued atthesametime
andwithequaleffectanditistherefore
permissible togiveoneorotherofthem
priority (cf.forexample judgment of13
March 1968inCase5/67 W.Bern
GmbH&Co.vHauptzollamt München
[1968] ECR83;judgment of24
October 1973inCase5/73Balkan-
Import-Export GmbH vHauptzollamt
Berlin-Packof [1973] ECR 1091;
judgment of2July1974inCase153/73
Holtz &Willemsen GmbH vCouncil
andCommission oftheEuropean
Communities [1974] ECR675).The
Community institutions haveawide
discretion inthismatter. Theyexercise
itaccording totheeconomic circum­
stances. Ontheotherhandthecase-law
oftheCourt nowhere indicates that
giving preference tooneobjective
requires evidence thatintheinterest of
thatobjective itisessential todisregard
otherobjectives.
Asfarthenastheindividual objectives
referred tobytheplaintiffs are
concerned thefollowing aremyobser­
vations onthealleged disregard of
them.
Withreference toArticle 39(a)itis
certainly ofimportance thatitusesthe
expressions "agricultural productivity"
and"rational development ofagri­
cultural productivity" and"rational
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OPINION OFMRREISCHL-CASE 125/77
development ofagricultural pro­
duction". Thisprovision canscarcely be
invoked iftheeffectsofaruleonnew
methods intheprocessing industry are
atissue.
Tothismustbeaddedthatithasnotso
farbeenestablished thattherules
relating totheleviesforthetimebeing
inforcemakeitimpossible tomanu­
facture isoglucose. Insupportofthisthe
figures produced sofar,onwhichthe
Community institutions haveregistered
somedoubts andhavenotasyetgone
intoinsufficient depth, areprobably
inadequate. Thereisthefurther point
thattheplaintiff inCase125/77 only
saysthatbecause ofthelevyisoglucose
hastoagreatextentbeeneliminated
fromthemarket andthattheplaintiff
Tunnel Refineries nevertheless beganto
produce isoglucose in1978evenifthe
scaleofproduction wassmaller than
originally planned.
Theplaintiffs' reference inthis
connexion tothesituation ofthe
workers inisoglucose factories is
undoubtedly inadmissible. Inmyview
suchconsiderations havenoplaceinthe
context ofArticle 39(a).Iftheywere
appropriate reference could onthe
otherhandalsobemadetothesituation
oftheworkers inthesugarindustry
which isplainly muchmorelabour
intensive andrepresents athreat to
isoglucose.
Lastbutbynomeans leastthe
submissions putforward inthis
connexion ontheeffects ontheagri­
cultural community ofimpeding the
production ofisoglucose alsoseemto
metocarrylittleconviction. Itistrue
thatitistechnically possible tomanu­
facture isoglucose notonlyfrommaize
butalsofrompotatoes andother
cereals. Butthepossibility ofsousing
thetwolast-mentioned products inthe
Community astheCouncil with
reference toprocessing costs has
convincingly shown bymeans of
figures, isruledout.Withregard tomaizewhich aloneisusedthedecisive
factorhowever isthatinspiteof
considerable expansion theproduction
ofmaizeintheCommunity presents no
problems atallsinceitdoesnotyet
meetCommunity demand byalong
way.Inaddition Community maize is
clearly lesssuitable forthemanufacture
ofstarchandisoglucose thanitisfor
useasfodder. Consequently onlyless
than100000tonnesoftheCommunity
maize usedforthemanufacture of
starch—about 1000000tonnes per
year—aresupplied forthemanu­
facture ofisoglucose andimported
maizeismainly usedforthis.
Theplaintiffs' reference toArticle 39
(d)—theassurance oftheavailability
ofsupplies —cannot inmyopinion
standbecause, ashasbeenexplained to
us,therulesrelating toquotasofthe
organization ofthemarket insugar
haveprovided forasufficiently large
safetymargin. Furthermore forsome
yearstherehasbeenasurplus inthe
Community —whichamounted to2.7
million tonnesforthemarketing year
1977/78 —andthissituation is
expected tocontinue bothinthe
Common Market andontheworld
market fortheforeseeable future.
Finallytheplaintiffs' reference toArticle
39(e)—supplies reaching consumers at
reasonable prices—wouldnotseemto
holdgood.Inthisrespect isoglucose
canindeedachieve nothingforthefores­
eeable future because inthemainit
follows thesugarprice.Thepointto
bearinmindaboutthesugarpriceis
thatowingtotheexisting intervention
system andthepresent surplus its
movements areinanycaseclosetothe
lowerCommunity pricelimit,namely
theintervention price.Itdoesnotdrop
below thatpriceifanadditional
sweetener appears onthemarket.
Conversely thesubmissions ofthe
Community institutions onthepursuit
oftheobjectives ofArticle 39in
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KONINKLIJKE SCHOLTEN-HONIG vHOOFDPRODUKTSCHAP VOORAKKERBOUWPRODUCTEN
connexion withtheproduction levyon
isoglucose seemtometobeconvincing.
According tothesesubmissions itsmain
purpose istostabilize thesugarmarket,
thatistosay,tocounteract anyincrease
ofthesurpluses. Inthisconnexion it
mustbeborne inmindthatthereare
already surpluses onthesugarmarket
andthatinviewoftheobligations
under theACP-EEC Convention of
Loméandalsotherulesrelating to
quotaswhichremain inforceuntil1980
andhaveestablished rightsinadefinite
way,therearescarcely anyother
possible waysofreducing thesurpluses.
Inaddition tothemainpurpose mustbe
mentioned theconcern toensure sugar
beetgrowers, forwhomtheapplicable
organization ofthemarket insugarhas
created certain rights,"afairstandard
ofliving"withinthemeaning ofArticle
39(b).Thepossibility isnottoberuled
outthatinfactafurther expansion of
isoglucose andtheattendant increase in
thepriceofsugarexports willcause
sugarbeetgrowing todecrease, atany
rateasfarasso-called Bsugar is
concerned, towhich indeed alower
minimum sugarbeetpriceapplies. A
changeover bythese agricultural
communities toproducts ofwhichthere
isnotalsonowasurplusmighthowever
notbepracticable inthemedium term,
quiteapartfromthefactthattheculti­
vation ofmaize —thismustbethe
primary consideration —isnotpossible
everywhere forclimatic reasons andthat
fortechnical reasons (rotation ofcrops)
growing sugar beetcannot be
completely abandoned.
Ifallthesematers areconsidered itcan
infacthardly besaidthattherules
relating totheleviesimposed upon
isoglucose prevent theattainment ofthe
objectives ofArticle 39,evenif
considerations suchasthefactthatitis
intheinterest ofconsumers forthe
budget nottohavetobeartoogreata
burden aredisregarded.(d)Thequestion whether therules
adopted discriminate against manufac­
turersofisoglucose, which isthe
unanimous viewoftheapplicants, now
hastobeconsidered.
Theirviewisthatsinceisoglucose
competes withsugaritshould notbe
subjected toahigherchargethansugar.
Thatishowever theposition sincethe
wholeoftheproduction ofisoglucose is
charged whereas inthecaseofsugara
levyforfinancing exports isonly
imposed onBsugar.Ifthischarge is
expressed intermsoftheentire
production ofsugar,andatthesame
timeitisassumed thattheBquotais
notusually exhausted, andifaccount is
takenofthelowersugarbeetpriceinso
farasBsugarisconcerned, thatisto
say,ofthefanthatpartofthischarge
ispassedontothefarmers, theninthe
caseofsugaranaverage chargeofone
unitofaccount orlessper100kgis
arrived atwhilstisoglucose hastobeara
charge fivetimesormoregreater than
this.
TheCommunity institutions inanswer
tothisrefertothefactthat,since
isoglucose isputonamarket where
thereisasurplus, itisonlylogical to
treatitinthesamewayassurplus sugar
andtherefore tochargeitinthesame
wayasBsugar.Theyalsotaketheview
thattheonlyobjectoftheproduction
levyonisoglucose istooffset the
competitive advantage whichisoglucose
derives fromtheorganization ofthe
market insugaranditsrulesforquotas
towhichisoglucose isnotsubject. The
priceofsugarfromwhich isoglucose
alsobenefits would infactbesome
15%lower wereitnotfortherules
relating toquotas. TheCommunity
institutions alsotaketheviewthatitis
notthecharges ontheproducts butthe
consequential effects onmanufacturers
which havetotbecompared. Hereit
mustbeborneinmindthatsugarmanu­
facturers onlyproduce oneproduct and
areentirely dependent upononebasic
product. Ontheotherhandstarch
2025

OPINION OFMRREISCHL —CASE 125/77
manufacturers, who alsoproduce
isoglucose, haveawiderangeof
products andcanhaverecourse toa
largenumber ofbasicmaterials. Since
theyarealllargeundertakings which
arecapiulratherthanlabourintensive
andsincetheproportion ofisoglucose
intheproduction ofstarchisonlysome
3°/otheyaredefinitely inaposition to
paytheproduction levyonisoglucose at
theprescribed rate.Finally isoglucose
derives benefits from thecommon
provisions applicable toitunderCouncil
Regulation (EEC)No1111/77 andis
frequently subjecttoalowerdomestic
taxation thansugar.Forthepurposes of
considering whether therehasbeenany
unequal treatment compared withsugar
objective reasons canbefoundandin
thisconnexion theobjectives ofArticle
39mustbeespecially borneinmind.
Itisobviously difficult tosettlethis
difference ofopinion because two
systems havetobecompared which
havebeendeveloped onquitedifferent
lines.Oneonlyhastothinkofthe
applicable restrictions onsugar
production, therulesrelating toquotas,
andtheobligation tokeepstocks as
wellastheguarantee topurchase sugar
which donotexistinthecaseof
isoglucose.
Ontheotherhandthedifficulties would
certainly notberemoved bylaying
downidentical rulesforisoglucose,
especially byintroducing rulesfor
quotas corresponding tothoseofthe
organization ofthemarket insugar.
TheCommunity institutions hadgood
reason toshowthatinthisconnexion
thefixingandallocation ofanyquotas
wouldcreateserious problems, asatthe
relevant timeproduction capacities were
beingbuiltupandontheotherhand
representative production figures were
virtually non-existent. Iftherules
relating toquotas weretobepractical
theymighthavenecessitated cutsinthe
sugarquotas; thearguments against
making suchcutsmighthavebeenthat
inthisconnexion ruleshavebeenlaiddownuntil1980,thatinacertain sense
therefore acquired rightshadtobe
considered. Itistherefore quiteunder­
standable thatthisproblem waskept
backforconsideration inconnexion
withthefuture definitive ruleswhich
aretoapplyfrom1980onwards. Onthe
otherhandbecause ofthegrowing
influence ofisoglucose onthesugar
marketitwasimperative atleastto
adoptprovisional rules.Whenthiswas
doneonlycertain rulesrelating tolevies
werepossible, ifcutting theBsugar
quotasforthe1978/79 marketing year
isdisregarded, whichobviously could
notbeeffected forthepreceding
marketing year,because attherelevant
timethesowing ofsugarbeethad
already taken place andcertain
promises hadbeengiventhattheold
quotaswouldbemaintained.
IfInowconsider therulesrelating to
leviesonisoglucose fromthestandpoint
ofdiscrimination somerelatively simple
observations mayfirstofallbemadeon
thisaspeaofthematter.
Inmyopinion thereference tothemini­
marketorganization forisoglucose with
itsimport andexpon system andthe
observation made inconnexion
therewith thatisoglucose derives certain
benefits fromtheseruleswhich stabilize
themarket aretherefore irrelevant. In
fanitmaywellbethattheyhaveat
present andwillforsometimetocome
havenoactualeffects. Isoglucose isin
fanonlymanufactured onalargescale
intheUSAandJapan; imports from
thesecountries arehardly feasible
however owingtothedisunce andthe
existing transpon problems raisedby
isoglucose Inotherwords thereis
consequently atthemoment noworld
market against thefluctuations ofwhich
themanufacturer ofisoglucose inthe
Community wouldhavetobeprotected
andthisisborneoutbythefigures
produced bytheCommission, during
theoralprocedure, forimports and
exports ofisoglucose sinceJanuary
1978.
2026

KONINKLIJKE SCHOLTEN-HONIG vHOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN
Inmyviewthereference tothefactthat
different domestic rulesrelating to
leviesapplytosugarandisoglucose is
alsonotdecisive. Thisisnotthecasein
allMember States—forinstance notin
theUnitedKingdom. Furthermore itis
notfortheCommunity institutions to
consider suchdivergences asitwerein
passing whentheyestablish amarket
organization.
Furthermore itcertainly cannot be
accepted as"logical" totreatisoglucose
assurplus Bsugarsimply because its
appearance onthemarket helpsto
increase thesugar surpluses. This
argument infactamounts tosayingthe
Community sugarmarket hassoto
speakalready beenallocated andthat
comparable newproducts inprinciple
havenoplaceonthatmarket butare
forexport.There isnodoubtthatthe
rulesrelating toquotascannot havethis
effect.Eveniftheserulesareaccepted
onaccount ofthestabilizing effectthey
have onthemarket —there is
important criticism ofthisaswell—
theycannot possibly however havethe
effectofmaking newdevelopments in
thissector practically impossible or
undulydifficult. According tothebasic
systemoftheTreaty, which isliberal,
access tothemarket must onthe
contrary beguaranteed onthesame
terms evenifincertain circumstances
thisinvolves additional sacrifices forthe
general public.
Furhermore Iconsider ittobe
inadmissible whenmaking thenecessary
comparison tofocusontheposition of
themanufacturers andtoconclude from
itthatlargestarchfactories whichalso
manufacture isoglucose couldwithinthe
framework oftheiroverall programme
whichallows acertain flexibility cope
withproduction leviesmoreeasilythan
labour intensive sugarmanufacturers
manyofwhich areonlysmall.Inthis
respect thepicture outlined bythe
Community institutions requires some
correction because infactories where
isoglucose ismanufactured itrepresentsagreater proportion oftheproduction
programme (17or25%)thanitdoesof
themanufacture ofstarch asawhole.
However thefanthatinunderukings
having severalproduction linescareis
takentoensurethatinprinciple each
individual product isinthelongrun
manufactured ataprofitisevenmore
important. Therefore inmyviewone
canonlyfocusonindividual products,
which compete witheachother,and
merelycompare thecharges imposed on
themandtheircapacity tobearsuch
charges. Moreover thisappears tometo
beinlinewiththecase-law oftheCourt
(judgment of19October 1977inJoined
Cases 117/76 and16/77, (Albert
Ruckdeschel &Co.andHansa-Lagerhaus
Ströh &Co.vHauptzollamt
Hamburg-St. Annen [1977] 1753)and
onlyinthiswaycananunintended
direct charge onstarch production,
whichinanycaseisunderconsiderable
pressure fromchemical competitors, be
avoided inthepresent case.
Ontheother handthereference to
alleged discrimination against isoglucose
compared withglucose, which isalsoa
sweetener produced bystarchmanufac­
turers,towhichtherulesrelating tothe
leviesdonotapplymustberegarded as
irrelevant. AstothisIrecallthepoint
which hasalready beenmade in
connexion withtheexamination ofthe
rulesrelating torefunds thatbecause of
theconsiderable difference inthe
sweetening property there wasno
competition.
Whenconsidering thequestion whatare
thecriteria inaccordance withwhich a
somewhat betterbalanced setofrules—
inviewofthecomplexity ofthe
relationship morecannot berequired —
canbefoundforisoglucose andsugar,
onemightfirstconsider treating the
levy onisoglucose assimply
compensation fora15°/oprice
advantage which isoglucose derives
fromtheorganization ofthemarket in
sugar.Thisappraisal stemsfromthe
history oftheestablishment ofthe
2027

OPINION OFMRREISCHL —CASE 125/77
organization ofthemarketinsugar.At
thattimetherewerevarious domestic
ruleswithofficially fixedpricesand
production quotas: theirprincipal
feature wasthatowingtothediffering
pricepatterns intheMember States
therewasnouniform pricelevel.On
thisbasisanapproximate market equi­
librium could also have been
established forthecommon organi­
zationofthemarketinsugarandother
products solelybymeansofaprice
system. However, ifthishadbeendone
priceswouldhavehadtobeatapproxi­
matelytheirlowlevelinFrancewiththe
resultthatbeetgrowing inregions ata
disadvantage would nolonger have
beenpossible. Inordertoruleoutthis
possibility ahigher pricelevel—at
approximately theItalian andGerman
prices—waschosen. However, inview
oftheexisting production capacities,
whichallow14million tonnesofsugar
tobeproduced, suchaprice-level made
restrictions onproduction necessary, if
inordinate surpluses werenottoarise.
TheCommunity institutions arguethat,
haditnotbeenfortheserulesrelating
toquotas, theCommunity pricelevel
would havebeenlower, namely by
about 15%.Sinceisoglucose benefits
fromtherulesonpricesapplicable to
sugarwithout beingsubjected toany
restrictions onitsproduction itcanbe
saidthattherulesrelating toquotas
giveisoglucose acompetitive advantage
ofabout15%oftheintervention price
whichcorresponds toapproximately five
unitsofaccount. Nevertheless Idoubt
whether thesereasons givenforthe
amount ofthelevyonisoglucose are
correct. Therecancertainly benodoubt
thatthereisalinkbetween thesugar
pricelevelandtherulesrelating to
quotas. Thepriceadvantages however
alsoapplytothesugarmanufacturers
andintheir case—andthisis
important —therulesrelating toquotas
haveverydifferent effects; favourably
located modern factories canreadily
produce thefullBquotaandindeedevenCsugar, sincethereisinfan
therefore norestriction oftheir
production. Therefore Idonotseehow
thedisadvantage atwhichsugarmanu­
facturers areplacedbytherulesrelating
toquotascanbequantified at15%of
theintervention price, asthe
Commission hasassumed, andwhy
accordingly inthecaseofisoglucose
there wassaidtobeasimilar
competitive advantage, whichcouldasit
werebecreamed off.ForthisreasonI
prefertocentretheexamination ona
comparison ofthecharges applicable,
ontheonehand,toisoglucose and,on
theotherhand,tosugar.
Indoingsotherecertainly seemstome
tobenojustification forproceeding as
theapplicants havesuggested, thatisto
say,ascertaining theaverage chargeof
theentiresugarindustry bymeansof
which—allowing forthelowerpriceof
sugarbeetinthecaseofBandCsugar
—withtheBquotasbeingcompletely
useduponethenarrivesatachargeof
aboutoneunitofaccount per100kg,
andwhatismore,ifaccount istakenof
thefanthatintheyears1971to1976
production ofBsugaronlyamounted to
between 11and19%oftheproduction
ofAsugar,thatistaking asabasisthe
anualaverage production ofBsugar,a
chargeofonlyonehalfofaunitof
account isarrived at.Inmyviewthis
methodofcalculation failstoappreciate
twoessential aspens. Inthefirstplace
thehistoryoftheestablishment ofthe
organization ofthemarket insugar
revealsthatAquotasugarisintended in
principle tosupport producers inun­
favourable regions andthatBquota
sugar isdesigned toencourage
production whereitismorecompetitive
andwhereifneedbeCsugarcouldalso
beproduced. Fromthisangletheidea
suggests itselfofforming agroupof
sugarproducers forwhomfirstand
foremost Bquotasugarismeant. On
theotherhanditisofimportance that
isoglucose manufacturers havelarge
modern factories which havemuch
2028

KONINKLIJKE SCHOLTEN-HONIG vHOOFDPRODUKTSCHAP VOORAKKERBOUWRODUKTEN
lowerlabourcoststhansugarfactories.
Itistherefore naturaltocompare them
withcorresponding modern sugarmanu­
facturers whoarefavourably located
andalsoworkefficiently. Theyare
unquestionably manufacturen whoalso
produce Csugarinlargequantities and
forwhom therefore theproduction
restrictions oftherulesrelating to
quotas areinpractice ofaslittle
importance astheyareforisoglucose
manufacturers.
TheCommission alsotookthisasa
suiting pointwhenitgaveusthe
example ofamodern sugarfactory
whichproduces agreatdealofCsugar
—intheyear1976/77 87%oftheA
quota.Inthecaseofthisundertaking it
calculated onthebasis ofthe
production figures ofthe1976/77
marketing yearanaverage charge on
sugarof11unitsofaccount, by
applying theactualproduction figures
fortheyear1976/77 which became
known later,achargeof8.71unitsof
account andfortheyear1977/78 a
chargeof13.80unitsofaccount per100
kg.However inmyviewsuchan
example canscarcely besatisfactory,
especially asweweretoldduring the
hearing thatinthefactory inquestion a
verylargeamount ofCsugarwas
produced, thatalargeincrease ofits
quota andofitsproduction was
effected, butthatitranatalossinthe
1976/77 marketing year.Onthe
contrary Iconsider thatitisnecessary
toplacetheexamination onabroader
basisandinclude allsimilar under­
takings intheinvestigation. Inthis
connexion itisappropriate toconfine
theinvestigation tothe1977/78
marketing year,notonlybecause a
production levywasimposed upon
isoglucose forthefirsttimeinthis
marketing year,butalsobecause the
drought inthepreceding 1976/77
marketing yearonlypermitted a
relatively smallproduction ofCsugar.
TheCommission hastoldusonbeing
askedtodosowhatkindofapictureemerges. According tothatpictureit
hastobeassumed thatsugarmanufac­
turersbearachargewhich isbetween
3.81and13.52unitsofaccount per100
kg.However Ialsoconsider —andon
thispointIagreewiththeapplicants —
thatitisproper asfarasconcerns this
calculation tobearinmindthatother
purchase pricesapplytosugarbeet
intended fortheproduction ofBandC
sugar,namely inthecaseofBsugara
minimum pricereduced by30%andin
thecaseofCsugar—asthereisno
minimum Community priceforit—a
market pricewhichin1976apparently
onlyamounted tosomething morethan
halfoftheminimum priceforsugar
beet.Therewerethereby included inthe
comparison, notasmightbeexpected
elements oftheproduction costswhich
would havebeenimproper butfactors
relating tothemarket organization
whichinthecommon organization of
themarket arefixedandarecalculated
toshiftaspecific portionofthecharge
ontosugarbeetfarmers, inthecaseof
Bsugar—asthesugarindustry itself
admits—about60%.Ifoneproceeds
inthiswayandifappropriate
corrections aremadetothefigures
produced bytheCommission —the
applicant Amylum hasworked themout
bywayofexample —thenonearrives
atcharges whicharevaluedatfiveunits
ofaccount forsixundertakings, at
ratherlessforfourundertakings andat
evenmorethanfiveunitsofaccount for
fourundertakings. However, onthat
basisandespecially ifitisborneinmind
—andtheCommission considers itis
appropriate todoso—thatfrequently
more than theminimum price,
sometimes eventheAprice,waspaid
forBsugarbeet,itcanbesaidthatthe
average charge onsuchsugarmanufac­
turersonthewholecorresponds tothe
charge whichisoglucose manufacturers
alsohavetobear.Weshould inthe
mainsticktothismethod sincethe
quantification ofother factors (the
advantages accruing totheisoglucose
2029

OPINION OFMRREISCHL —CASE 125/77
manufacturer fromlowermarginal costs
andtheexistence ofby-products —
guaranteed purchase ofsugarandthe
sugarmanufacturers' obligation tokeep
stocks)isunsatisfactory.
Inthefinalanalysis thismeansthatthe
production levyfixedforisoglucose,
whichfromnowuntiltheendof1980is
tobefiveunitsofaccount per100kg
doesnotinfandiscriminate against
isoglucose manufacturers, and
accordingly itisunnecessary togo
further intothequestion whether
placing isoglucose atadisadvantage
mightnotevenbejustified onthe
ground thatweareonlyconcerned with
transitional rulesapplicable forafew
years,thatthesugarmanufacturers
mightbesaidtohavewellestablished
rights,thattheremight beacertain
Community preference forsugar
extracted fromsugarbeetproduced in
theCommunity asagainst isoglucose
whichismanufactured principally from
imported products.
(e)Sincethecomplaint ofdiscrimi­
nation, which isprobably tobe
regarded astheprincipal complaint is
thusunfounded, thequestion whether
objection couldbetakentotherules
whichhavebeenadopted because they
areinbreachoftheprinciple ofpro­
portionality must furthermore be
considered. Asisgenerally known,
according tothisprinciple which has
beenrepeatedly applied andexplained
inthecase-law oftheCourt, anofficial
measure mustnothaveanygreater
effect onprivate interests thanis
necessary fortheattainment ofits
objective anditmustbeestablished that
itcanonlywithdifficulty bereplaced by
lessstringent measures.
Theapplicants taketheviewthatthis
requirement isnotsatisfied forvarious
reasons bytherulesrelating tothe
levieswhich havebeenadopted, the
purpose ofwhich according tothe
statements ofthe Community
institutions istofixacontribution tothefinancing ofexportsofsurpluses and
thereby slowdownthegrowth of
isoglucose. Theytaketheviewthatan
appropriate contribution tothe
financing ofexportsofsurpluses —
quiteapartfromthefactthatthe
surpluses weretobedisposed ofin
another way,namely byreducing the
quotas —ought tohave been
determined bythemarket shareof
isoglucose, whichatthepresent timeis
about3Voofsugarconsumption. They
alsotaketheviewthat,havingregardto
theobjective ofslowing downthe
growth ofisoglucose, theproduction
levymustberegarded asexcessive,
because theCommunity institutions
haveobviously proceeded onthebasis
ofmisconceptions astothevolumeof
exports tobeanticipated, asto
isoglucose's possible market shareand
alsoastoitsproduction costs,ifthe
latterwerenotquitewrongly wholly
leftoutofaccount. Furthermore the
fanhastobefacedthattheproduction
levydoesnotslowdownthegrowthof
isoglucose butmakesdiscontinuance of
itsproduction unavoidable.
Onthisissuethefollowing briefobser­
vations haveinmyviewtobemade.
Insofarastheapplicants mention
exaggerated fearsconcerning sugar
exports—theythemselves giveafigure
ofabout500000tonnesforthecurrent
marketing year—itmustbebornein
mindthattheyhavenotsucceeded in
questioning thefigureof2.7million
tonnes givebytheCommunity
institutions. Itisapparent thatthe
applicants havesimplycarried forward
theproduction figuresofAandBsugar
ofthe1976/77 marketing yeartothe
following marketing yearanddeducted
fromthemthepresumed consumption.
However, whentheydidthis—apart
fromthefanthatitisnecessary to
proceed onthebasisofhigher
production values—theyoverlooked in
particular thequantities inrespectof
whichthereareobligations toimpon
under theACP-EEC Convention of
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KONINKLIJKE SCHOLTEN-HONIG vHOOFDPRODUKTSCHAP VOORAKKERBOUWPRODUCTEN
Lomé.IfthevaluesoftheCommunity
institutions aretaken asabasisandif
thechargeaccruing therefrom tothe
budget isconsidered itishardlypossible
totalkofisoglucose manufacturers
beingrequired tomakeanexcessive
contribution. Infacttheyonlybearless
than3%ofallexportcosts:inrelation
totherateoftherefundpertonne(220
unitsofaccount) theirshare(50unitsof
account) amounts tolessthanone
quarter. Ifontheotherhandonly3°/o
ofthetotalcostswhich sugarand
isoglucose producers bearwereimposed
upontheapplicants inaccordance with
theirmarket share,whichtheyconsider
tobetheappropriate method, thenthe
other objective which hasbeen
mentioned, theslowing downofthe
growth ofisoglucose, wouldhardly be
attained.
Iamunableinaddition toacceptthat
theproduction levycouldinfanhave
beenavoided orreduced byan
amendment oftherulesrelating to
quotas applicable tosugar. Suchan
amendment isruledoutwithreference
toAquotas because intheircaseuntil
theruleswhichareatpresent inforce
expire, thatisuntil1980,thereisthe
question ofthelegalsituations which
havearisen. InthecaseofBquota
sugar aspecific reduction wasdecided
uponforthe1978/79 marketing year.
However, inmyviewthere are
significant considerations relating to
agricultural policy, which Iexamined
justnowwhen Idealtwiththe
objectives ofArticle 39,whichmilitate
against areduction byanamount which
would considerably reduce theexport
levyoreveneffectively abolish it.
Furthermore with regard tothe
applicants' argument thatwhen the
Community institutions fixedthelevy
theyproceeded onthebasisof
misconceptions astotheproduction
costsofisoglucose anditspotential to
oustspecific quantities ofsugarfrom
themarket within ashorttime,itmay
indeed turnout—andthisreferstothelastmentioned point—thatthe
forecasts oftheCommunity institutions,
whichImentioned justnowwhenI
dealtwiththeeconomic dau,were
pitched toohigh.Onthispoint
reference canindeed bemadetothe
fanthatthelapseoftheproduction
refund hasaslowing downeffenand
thatinsomeMember Stateslegalrules
restrict theuseofisoglucose. Fur­
thermore itisofinterest tonotethaton
theAmerican market, anareainwhich
isoglucose hasalready beenproduced
foralongtime,wheretheproduction
ofsugar isinadequate butalarge
amountofmaizeisproduced andwhere
perhaps reasons oftasteandbusiness
patterns enable isoglucose tobeused
extensively, theproduction of
isoglucose forthe1976/77 marketing
yearissaidtohaveamounted toonly
about 1.2million tonnes. However,
according tothecontentions ofthe
Community institutions thelevelofthe
production levyhasnotbeenfixedon
thebasisofisoglucose's potential share
ofthemarket. Likewise theproduction
costsofisoglucose didnotserveasa
guide-line fordetermining thelevy.On
thecontrary themainideaforthiswas
tocharge isoglucose andsugarinthe
sameway.
Finally inconnexion withtheprinciple
ofproportionality —andwiththis
observation Iconclude myremarks on
thiscomplaint —therecanbeno
question ofproceeding onthe
assumption thatthelevywasfixedin
suchawaythatitrenders themanu­
factureofisoglucose impossible. Onthe
contrary itismyimpression thatthe
figureswhichhavesofarcometolight
areinsufficient tosupport suchan
assumption. Likewise acharge which
modern sugarfactories seemtobeable
tobearcanalsobeborne inthesame
waybythelesslabourintensive manu­
facturers ofisoglucose. However, in
principle thisviewpoint canleastofall
haveanydecisive significance whenall
otherconsiderations pointtothecharge
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OPINION OFMRREISCHL —CASE 125/77
beingfair.Iftheposition wereasthe
applicants consider ittobethenit
wouldonlybeevident thatthemanu­
factureofthisnewproduct, inwhichit
wasdecided toinvest when the
economic situation wasentirely
different, justcannot becarried on
economically under existing circum­
stances andinsuchawayastomaintain
theconditions ofcompetition which
applytosugar.
(f)Theapplicants alsosubmitthatthe
Community institutions havewrongly
failedtoprovide foranytransitional
rulesandderogations forexisting
capacities andtheargument putforward
intheproceedings relating tothe
liability ofpublic authorities for
damages thattheapplicants havebeen
frustrated intheir legitimate
expectations isconnected withthis.
Theapplicants pointoutthatisoglucose
hasforsometimebenefited from
production refunds, thatistosay,from
certain measures topromote it.The
Community institutions wereawareof
theeffortstodevelop isoglucose inthe
Community andalsoknewaboutthe
consequent decisions toinvestinit.
Nevertheless theydidnotatanytime
drawtheattention oftheapplicants to
thefanthatinviewofathreattothe
sugar market caused byisoglucose
production measures mightbeadopted.
Asfarasthefirstpartofthisargument
isconcerned itsuffices torefertothe
fanthatithasalready become clearin
thiscasethattheproduction refundwas
notintended forisoglucose andthatthe
latterwasnotincluded among the
objectives oftherelevant rules.Thefact
thatisoglucose manufanurers benefited
foratimefromtherulesrelating tothe
refunddoesnotestablish anylegitimate
expectation offurther encouragement
andpreferential treatment.
Fortheresttherecanonlybesaidtobe
abreach oftheprinciple ofthe
legitimate expectation thatagivenlegal
position would continue if,havingregardtoalltherelevant circumstances
andespecially totheconduct ofthe
Community institutions, there were
grounds forbeingabsolutely certain
thataspecific legalsituation wouldnot
be'altered. Butthatisoutofthe
question inthesecasesasfarasthe
production levyisconcerned. The
Community institutions wererightto
stressthattheapplicants operate ina
fieldwhich istechnically veryclosely
connected withthesugarmarket and
thattheyknewallaboutthismarket
andtherulesgoverning it,especially
thoserelating totheproblem ofthe
surplus. Theytherefore hadtotakeinto
account thefanthat,insuchan
economic situation, far-reaching stabi­
lization measures wouldbeadopted and
thatthesystem offinancing exports
would alsobeextended tosubstitute
products assoonastheyarrived onthe
market inconsiderable quantities, and
thatbynomeanstheleastreasonfor
thiswasthatanamendment oftherules
relating toquotas andtheimport regu­
lationsfortheACPsugarwasnottobe
expected before 1980.
Forthatreason andespecially because
thepreparatory workinconnexion with
themeasures hasbeencarried outin
suchgoodtimethatexisting contracts
werescarcely affected bythemthere
wasnooccasion toadopt special
transitional measures whichmighthave
frustrated theeffenoftherules.If
however isoglucose manufacturers
nevertheless gotinto unexpected
difficulties thatwastheirownfault,
because whentheymadetheirdecisions
toinvesttheydidsoonthebasisof
specific forecasts oftheeconomic trend
—acontinuing sugardeficit andrising
prices—whichnowturnouttobe
wrong.
(g)Theotherargument which has
nowstilltobedealtwith—italsoori­
ginates intheproceedings relating to
theliability ofpublicauthorities —
namely thattherulestowhich
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KONINKLIJKE SCHOLTEN-HONIG vHOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUKTEN
exception istakencontravene theright
tocarryonabusiness freely,whichcan
benumbered among theprinciples
whichtheCommunity institutions also
havetoobserve, isinacertain way
connected withtheprinciple ofpro­
portionality which hasalready been
dealtwith.Onthispointtheapplicants
onceagainsubmitthattheproduction
levyrenders themanufacture of
isoglucose impossible, infactevenatthe
leveloffiveunitsofaccount per100kg
whichwasoriginally limitedtooneyear
andnowappliesuntil1980.Thecapital
invested inisoglucose hastherefore
beenlost;theCommunity institutions
should ineachcasehaveprovided for
compensation forthis"expropriation".
OnthisIcanfirstofallonlyrepeatthat
ithasnotbeenproved thatthis
economic consequence isinevitable even
ifthecalculations produced bythe
Community institutions havenotsofar
beenacknowledged tobeconclusive. It
alsoappears tobeinprinciple unlikely
—andtheconduct oftheapplicant,
Tunnel Refineries, supports thisview—
thattransitional rulescouldgiveriseto
suchadrastic stepastheclosing down
ofafactory.
Fortheresttheeffect ofthe
apprehended discontinuance of
isoglucose production, iftheworst
comestotheworst, isthedisappearance
ofonebranch ofthestarch manufac­
turingindustry sothattheexistence of
theundertaking concerned assuchis
notendangered. Butsuchastateof
affairs canscarcely besaidtobean
interference inthebusiness amounting
toexpropriation.
Bynomeanstheleastofthearguments
oftheCommunity institutions inthis
connexion istheir reminder that
according tothecase-law oftheCourt
(judgment of14May1974inCase4/73
JSold,Kohlen- undBaustoffgroß­
handlung vCommission oftheEuropean
Communities [1974] ECR491)rights
suchasthosewhicharcasserted inthesecasescanberestricted inthepublic
interest. Onthispointitmustbeborne
inmindintheseproceedings thatthe
applicants operate inafieldinwhich
considerations ofagricultural policyare
veryimportant andforthatreason
freedom ofmanoeuvre isinanycase
veryrestricted.
Itherefore assume thatthelegality of
therulesuponwhichjudgment hasto
bepassedcannot beseriously calledin
question byrelyingontherighttocarry
onabusiness freely.
(h)Itonlyremains formetoconsider
thecomplaint ofamisuseofpowers
which theapplicants make onthe
ground thatasetofrulesrelating to
leviessuchasthoseinvolved inthese
casesmayonlybeadopted underArticle
40oftheEECTreatyinconnexion with
anorganization ofthemarket. Butthere
isnorealorganization ofthemarketfor
isoglucose, because theadvantages to
accrue toisoglucose under Council
Regulation (EEC)No1111/77 havenot
asyetbeenrealized. Furthermore the
rulesrelating toleviespursue illegal
objectives suchasneutralization ofthe
competition offered byisoglucose and
slowing downitsgrowth, protection of
thesugarindustry which isrunning less
economically andlightening theburden
oftheCommunity budget.
Onthispoint Ihave already
acknowledged inanother connexion
thattheadvantages which isoglucose
wasexpected toderivefromtheorgani­
zation ofthemarket arenotatthe
moment ofanyrealsignificance.
However thatnaturally doesnotmean
thattheorganization ofthemarket in
isoglucose ismereshow.Thecourse
whichfurther development isexpected
totakeisentirely inforeign trade
although perhaps notsomuchwith
overseas countries aswithEuropean
countries bordering ontheCommunity.
Isimply recallthatthelargeFrench
shareofisoglucose production hastobe
exported because oftheprohibition of
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OPINION OFMRREISCHL —CASE 125/77
itsusewhichappliesinFrance. Fur­
thermore, eveniftherulesrelating to
theleviesareperhaps seldomapplicable
inpractice, therulesrelating tothe
refund, which indeed alsoapplyto
isoglucose inprocessed products, have
tobeborneinmind.Idonottherefore
consider thattheintroduction ofa
production levyonisoglucose is
inadmissible because thereisnoreal
organization ofthemarket in
isoglucose. Quiteapartfromthat,the
imposition ofproduction leviesonsub­
stituteproducts underArticle43ofthe
EECTreaty caninanycasebe
regarded aslawful,ifacorresponding
levywithintheframework ofanorgani­
zationofamarket —inthesecasesthe
organization ofthemarket insugar—
isimposed onagricultural processed
products.
Asfortherestnothing hascometo
lighttoshowthattherealaimofthe
rulesisonlytheneutralization ofthe
competition offered byisoglucose and
theprotection ofthesugarindustry. As
wehavebeenshown therulesaim—in
ordertoavoiddiscrimination against
sugar—atnothing elsebutthe
extension oftherulesoncontributions
applicable tothisproduct tosubstituteproducts which haveconsiderable
importance onthemarket.Ifhowever
inthisconnexion theaimofslowing
downthegrowthofisoglucose inthe
interest ofstabilizing themarket has
played apan—theCommunity
institutions referspecifically tothisin
answers toParliamentary questions —
thiswould bejustaslawful astheother
subsdiary concern, namely toproteo
theCommunity budget fromburdens
whicharetooheavy.
Itherefore findthatthereisnobasisfor
thecomplaint thattherehasbeena
misuseofpowers.
(i)Allthingsconsidered ittherefore
emerges thattherearenogrounds for
legitimate doubts astothevalidityof
therulesgoverning thelevieson
isoglucose andthat there is
consequently noreasontoassume that
Council Regulation (EEC)No1110/77
andCouncil Regulation (EEC) No
1111/77 areinvalid andthatthe
provisions adopted bytheCommission
fortheirimplementation, inrespectof
whichspecific arguments havenotbeen
submitted during theproceedings, are
alsoinvalid.
Itherefore submitthatthequestions referred forapreliminary rulingbe
answered asfollows:
1.During theproceedings noreasons havebecome apparent whichmight
justifytheassumption thatCouncil Regulation (EEC)No1862/76 inso
farasithasaddedanArticle 5(a)toRegulation (EEC)No2742/75 of
theCouncil andCouncil Regulations (EEC)No1110/77 and(EEC)No
1111/77 areinvalid.
2.Article 4ofCommission Regulation (EEC)No2158/76 istobe
interpreted asmeaning thatitalsoappliestotherecovery ofrefunds,
whichhavebeengranted inrespectoftheproduction duringtheperiod
from 1Augustto3September 1976ofglucose having ahighfructose
content.
2034