OPINION OF MR ADVOCATE GENERAL

VERLOREN VAN THEMAAT

delivered on 11 October 1984 ( *1 )

Mr President,

Members of the Court,

1. Introduction

1.1.

In my opinion of 14 October 1982 I have already stated my views on the objection of inadmissibility raised by the Commission against the application by S.A. Piraiki et al for the annulment of Commission Decision No 81/988/EEC of 30 October 1981 (Official Journal 1981 L 362, p. 33). The further observations on the question of admissibility made by the parties after the Court's decision of 6 December 1982 reserving until final judgment its decision on the objection do not call for any additional comment on my part. It should be recalled that I concluded in that opinion that the objection of inadmissibility raised by the Commission must be rejected in so far as the application relates to export contracts concluded by the applicants before the adoption of the Commission's decision. Photocopies of the contracts concerned are annexed to the applicants' reply. The Commission admits that at least some of those contracts were affected by the protective measures in issue. The condition which I said governed the admissibility of the applications is therefore fulfilled, at least for some of the applicants. In this opinion I shall therefore devote my attention exclusively to the substance of the case. I must however note that according to its remarks at the hearing, some of them in reply to questions put by the Court, the Commission is alarmed by the ground of admissibility which I advocated and considers that it will have automatic and unacceptable consequences with regard to the preparation and content of protective measures such as those now in issue. On the one hand, the Commission thinks that if my point of view were followed, in preparing a decision authorizing the taking of protective measures it would from now on be necessary in every case to consider what existing contracts would be affected by the decision. It apparently fears, moreover, that my point of view, if it were followed by the Court, would require transitional provisions for such existing contracts, with the attendant risk of fraudulent antedating of contracts. I should like to point out that the availablity of recourse for affected undertakings which I have advocated does not in itself necessarily entail either of the results feared by the Commission with regard to the preparation or content of protective measures.

1.2. The principal facts

The contested decision is based on Article 130 of the Act of Accession of Greece. In so far as its substantive content is concerned, that provision corresponds almost entirely to Article 226 of the EEC Treaty. In contrast to the situation under Article 226, however, a Member State other than Greece can rely on Article 130 of the Act of Accession only against Greece.

For the content of the contested decision reference may be made to the Official Journal. In considering the substance of the case the following aspects of the preamble to the decision are of particular importance The French Government requested authorization to take protective measures with regard to the import of all cotton yarns of Greek origin (carded as well as combed yarn). The stated ground, however, serious and persistent difficulties in a sector of the French economy and in a specific region in France, relates exclusively to combed yarn (recitals 3 to 8). The import statistics set out in the ninth recital relate both to combed and to carded yarn. It is stated in the 10th recital that it is clear from those import statistics that during the first six months of 1981 imports of cotton yarn from Greece increased only in France and Ireland. That statement can only be regarded as an adequate basis for the conclusion drawn in the 11th recital, that the increase in French imports from Greece must be considered the main cause of the increasing difficulties encountered by French producers of combed yarn, in so far as it is also stated in that recital that combed yarn accounts for approximately 75% of the cotton yarn imported from Greece. It appears from the 12th and 13th recitals in the preamble to the decision that although it was intended to give temporary protection only to the French combed yarn industry, for technical grounds relating to customs clearance France was authorized to limit imports of all cotton yarn of Greek origin during the period covered by the decision to the amounts there laid down. Article 3 of the decision contains a transition provision according to which the decision does not apply to consignments of cotton yarn dispatched from Greece before the notification of the decision to France and to the Hellenic Republic.

1.3.

For the six submissions made with regard to the substance of the case reference may be made to the application originating the proceedings. The first and most important submission alleges that the four most important conditions of application of Article 130 of the Act of Accession were not fulfilled. In the second submission it is argued that the Commission failed to state proper reasons for its decision, having regard to those conditions of application. The third submission alleges infringement of the principle of proportionality laid down in Article 130 (3); that submission is however only a further elaboration of the third and fourth heads of the first submission. The first three submissions may therefore best be dealt with together.

In the fourth submission the applicants argue that the Commission infringed the principle of nondiscrimination, inasmuch as France was authorized to apply protective measures only with regard to the Hellenic Republic. That submission must be rejected forthwith, since neither Article 130 of the Act of Accession nor Article 226 of the EEC Treaty empowered the Commission to authorize France to apply protective measures with regard to other Member States during the period in question.

In the fifth submission the applicants argue that the Commission infringed the principle of Community preference, inasmuch as it limited its examination of the situation and its measures to imports from Greece. I shall also deal with that submission in conjunction with the first three submissions. In this case I think that that submission is relevant only to the question of the causal relationship between the difficulties encountered by the French combed yarn industry and the import of combed yarn from Greece.

In the sixth submission the applicants allege infringement of the principle of free competition, which is fundamental to both the EEC Treaty and the Act of Accession. Since any use of Article 130 of the Act of Accession must by definition limit the competitive possibilities of the export industry affected, that submission must be rejected.

In summary therefore it is mainly the first three submissions of the applicants which are significant; the fifth submission must also be taken into consideration as indicated above. Having regard to the main points of the written observations of the parties, summarized in the Report for the Hearing, and to the remarks made by the parties at the hearing, I consider the following to be the crucial questions for the Court:

(1) Is it sufficiently established that the difficulties encountered by the French combed-yarn industry during the material period were serious and that they were caused to a significant degree by the importation of combed yarn from Greece?

(2) Does the combed yarn sector constitute a ‘sector of the economy’ within the meaning of Article 130 of the Act of Accession?

(3) Are the criteria of serious sectoral difficulties and serious difficulties in a given area, referred to in Article 130 of the Act of Accession, cumulative or alternative in nature?

(4) In its decision, did the Commission infringe the requirement laid down in Article 130 (3) of the Act of Accession that only such measures as are ‘strictly necessary’ should be authorized, and the general principle of proportionality, in particular by failing adequately to weigh the interests of the Greek and French producers and by extending the measures to cover yarn other than combed yarn?

In the second part of my opinion I shall examine those points, which I consider crucial, one by one. As pointed out above they correspond in the main to the first three submissions of the applicants. I have already found the other submissions of the applicants to be unfounded.

2. Review of the points raised

2.1. The difficulties encountered by the French combed yam industry and their causes

The applicants admit in their application and in their reply that the production of combed yarn in France declined by 11.2% in 1981, that the import into France of combed yarn from Greece increased between 1980 and 1981 and that its market share in France rose during that period from 17.5% to 24.5%. They also admit that the share of the Greek industry in total French imports rose during that period from 55.3% to 59.9%. Nor do they dispute the statement in the decision at issue that Greek exports to other Member States of the EEC during the first six months of 1981 increased with regard only to France and Ireland. Having regard to those facts admitted by the applicants and to the other relevant facts contained in the decision and not as such disputed, I am of the view that the Commission has adequately shown that the French combed yarn industry did in fact encounter serious difficulties. Although the Commission expressly admitted that those serious difficulties also had internal causes, moreover, I think that it has been adequately shown by the facts admitted by the applicants and referred to above that the import of combed yarn from Greece contributed to those difficulties to a considerable extent. In its written pleadings the Commission itself assumes that Article 130 of the Act of Accession leaves it very little freedom of action. Furthermore, in view of the extent to which its application encroaches on the fundamental principles of the Community, Article 130 must be interpreted restrictively, as the applicants correctly contended. At the time Article 226 of the EEC Treaty, too, was applied by the Commission only with the greatest of caution. Although Advocate General Dutheillet de Lamothe, in Case 37/70 (Rewe-Zentrale, [1971] ECR 23 at p. 42), speaking of protective measures like those now in question, correctly argued for a certain freedom of action on the part of the Commission, that liberty may not of course go so far as to prevent the Court from ensuring respect for the very stringent requirements laid down by Article 130 of the Act of Accession. In this case, however, I think that the serious difficulties encountered by the French combed yarn industry and the important contribution of Greek imports to those difficulties have in fact been adequately shown, as pointed out above.

2.2. The tenn ‘sector of the economy’

As I have already pointed out in my introductory remarks, the third to 11th recitals of the preamble to the decision, regarding the serious difficulties stated to exist, focus entirely on the French combed yarn industry. Having regard to the difficulty of distinguishing combed yarn from carded yarn, referred to in recital 12, the applicants nave quite correctly raised the question whether that is compatible with the statement in the third recital of the preamble that combed yarn is a commodity clearly distinguished from other related products and therefore constitutes a sector of the economy within the meaning of Article 130 of the Act of Accession.

The first head of the first submission of the applicants (in which it is denied that the production of combed yarn constitutes a sector of the economy) must however be regarded as well founded quite independently of those contradictory recitals in the preamble to the decision. In itself the term ‘sector of the economy’ of ‘branch of industry’ is not a term with an absolute and fixed meaning, but a relative term whose content depends on the objective of the market arrangements in which the term is used. Thus collective agreements and other arrangements concerning the labour market usually cover very broadly defined sectors of the economy, for example the entire metal industry, the entire textile industry or the entire chemical or foodstuffs sectors. Conversely, as a general rule market arrangements governed by private or by public law cover much smaller sectors. The market arrangements for agricultural products as well as pricing agreements and other cartel agreements between undertakings offer more than ample illustration of the generally more restricted scope of the term ‘sector’ in the economic law. In itself the Commission is certainly correct when it says that combed yarn presents individual characteristics on both the supply and demand sides. If the term ‘relevant market’ used in decisions of the Court regarding Articles 85 and 86 of the EEC Treaty were applied to the issue now before us, the production of combed yarn could certainly be regarded as a separate ‘sector’. In my view there are however two compelling reasons why the term ‘relevant market’ should not be regarded as equivalent to the term ‘sector of the economy’ in Article 130 of the Act of Accession in that way. The first reason is of a linguistic nature. It would be contrary to linguistic usage to speak of a group of undertakings, interconnected with regard to important organization aspects, which produce various sorts of products each having its own relevant market (for example the tyre industry in the Michelin case, Case 322/81, [1983] ECR 3461) for that reason alone not as one but as a number of sectors. There is however a second, more important reason. It would be incompatible with the restrictive intention of the conditions of application of Article 130 to interpret the term ‘sector of the economy’ in such a way that for practical and technical reasons the application of protective measures could not be limited to the sector concerned, that is, without at the same time creating obstacles to trade for products outside that sector. As has been said, the term ‘sector’ is a relative term which must be interpreted in the light of the objectives of the market arrangements concerned.

The stated basis for the use of the term ‘sector of the economy’ in the third recital in the preamble to the decision at issue is clearly taken from the definition and application of that term in Case 13/63 (Italy v Commission [1963] ECR 165). In that case the Court held (at p. 176) that ‘the production of a commodity can constitute such a sector if that commodity, according to generally accepted ideas, is clearly different from other related products’. In applying Article 226 of the EEC Treaty, which may be compared with Article 130 of the Act of Accession, the production of refrigerators, in issue in that case, could certainly be regarded as a clearly distinct sector within the larger sector of electric household apparatus. The limitation of the protective measures to that product, entirely in conformity with the restrictive conditions of application of Article 226, presented no practical or technical problems. In this case however the limitation of the protective measures to what is referred to in the third recital in the preamble to the decision as the relevant ‘sector’ appears for practical reasons to be very difficult if not impossible. The interpretation given to the term ‘sector’ in the decision is therefore incompatible with the objective of Article 130 of the Act of Accession.

2.3. Applicability of the criterion of serious difficulties in a given area

The parties are agreed that the criteria of sectoral problems and regional problems which appear in Article 130 of the Act of Accession are alternative, not cumulative, in nature. Since protective measures such as those now at issue cannot be limited in their effect to particular regions of the country of importation, as a rule restrictions on imports on the basis of ‘difficulties which could bring about serious deterioration in the economic situation of a given area’ are only justified where by far the greatest part of the production concerned takes place in that region. According to the fifth and seventh recitals in the preamble to the decision that is not so in this case, since only 47% of the workers concerned are employed in the relevant region and only 54% of production takes place there. In my view, in such a case only other protective measures such as support measures can be considered compatible with the objectives of Article 130. In its defence, moroever, the Commission treats the regional argument exclusively as an argument reinforcing the arguments based on sectoral difficulties. As such it naturally stands and falls with the validity of those latter arguments. The regional criterion itself cannot therefore justify the decision in this case.

2.4. The requirement of necessity in Article 130 (3) and the general principle of proportionality

Article 130 (3) of the Act of Accession provides that ‘the measures authorized under paragraph 2 may involve derogations from the rules of the EEC Treaty and of this Act to such an extent and for such periods as are strictly necessary in order to attain the objectives referred to in paragraph 1’. In addition to that requirement regarding the ‘strict necessity’ of the authorized measures (third head of the first submission) the applicants also rely in their application on the general principle of proportionality, as developed in the case-law of the Court (second and third heads of the third submission). On balance the most important reproach that the applicants make to the Commission with regard to those conditions of application is that the grounds advanced as snowing that the conditions of Article 130 (1) have been fulfilled relate exclusively to combed yarn, whereas the measures which France was authorized to take apply also to carded cotton yarn.

In the 12th recital of the preamble to the decison and throughout the proceedings before the Court the Commission, and the French Government in support of it, argued that that extention of the sphere of operation of the protective measures was unavoidable for technical and practical reasons, and was also in the interest of the Greek yarn industry to the extent that it was only in this way that difficult and lengthy checks on the import of all yarns from Greece could be avoided.

I do not consider that defence to be sound. In the first place, as already follows from what I have said with regard to the term ‘sector’, that argument would logically lead to the conclusion that the production of combed yarn and carded yarn would have to be considered together as the relevant ‘sector of the economy’. Secondly, in the statement of the grounds for the decision it would therefore have been necessary to show, with regard to the requirements of Article 130 (1), either that difficulties which were serious and liable to persist existed in the whole of the French sector concerned or that the production of combed yarn constituted by far the greater part of French yarn production. Neither case was however made out. On the contrary, it appears from the fourth recital in the preamble to the decision that the production of combed yarn accounts for only a small part (14%) of the French cotton yarn industry. Thirdly, it was not shown in the decision or during the proceedings why the technical problems of supervision referred to make it impossible to implement the protective measures in such a way that the importation of carded yarns in excess of the permitted quotas was not without further reason affected. Where quotas were exceeded, that could have been done for example, by subjecting consignments declared to be carded yarn to laboratory tests but not to quantitative restrictions.

In my view the submissions of the applicants now under discussion are therefore well founded, at least to that extent. I therefore do not consider it necessary to deal with the contention, which is moreover not undisputed, that the Commission failed sufficiently to take into account the interests of the Greek industry.

2.5. The alleged defects in the statement of grounds

To the extent that they were relevant I have already discussed the defects in the statement of grounds alleged by the applicants in connection with their other submissions. I shall therefore not deal with them separately.

3. Conclusion

In summary I am of the opinion that:

(1) In its statement of the grounds for the application of Article 130 (1), the Commission based itself on an unacceptable interpretation of the term ‘sector of the economy’;

(2) As a result of that unacceptable interpretation it has not been shown, in respect of the larger sector for which protective measures were authorized, that serious difficulties existed which could justify the application of those measures;

(3) It has not been shown that there were any difficulties affecting a given area as referred to in Article 130 (1) which could by themselves justify the application of the authorized protective measures;

(4) The technical arguments raised in the decision do not adequately support the simple extension of the protective measures to products with regard to which the decision does not state, let alone show, that their unlimited importation would further aggravate the difficulties encountered by the French cotton yarn industry was strictly necessary.

On those grounds, and maintaining my earlier opinion that the application is admissible, I conclude that the contested decisions should be declared void and that the Commission should be ordered to pay the costs of the case, with the exception of the costs incurred by the French Republic which should bear its own costs.

( *1 ) Translated from the Dutch.