3.

In examining the next question, whether claims to liability arising for breach of official duty (‘Amtshaftungsansprüche’) are wellfounded, one must, in the light of the arguments so far adduced, first investigate whether the provisions criticised by the applicants are contrary to law and whether there can be a question of a clear infringement of a protective norm of superior law. (a) In this connexion we first have to deal with an argument put forward by the applicants which need not detain us for long. It runs as follows: the main cause of German mills processing cereal meal from durum wheat being jeopardized are the measures for encouraging the cultivation of durum wheat i.e., the grant of aid which guarantees a minimum price to the producers and thus creates an incentive to cultivation. In this way it is said that there was an appreciable increase in cultivation and thus a strengthening of the position of those mills that can process durum wheat originating within the Community. Without these measures of encouragement on the other hand things would, according to the applicants, have remained as before; in particular durum wheat would in northern France only have been cultivated to a limited extent and the mills established there would therefore to a large extent have had to process durum wheat of third country origin, just as the German mills had had to, i.e., they would have had the same starting-point as the applicants. If however one looks at the measures of encouragement in the light of the objectives of Article 39 of the EEC Treaty, one has to recognize that those measures are not essential for their attainment. The objectives there set out can really also be attained without cultivating durum wheat, indeed possibly — if one thinks in terms of the denaturing costs and costs of refunds on common wheat — at lower cost. Looking at the matter in this way, one can therefore think in terms of a disregard of Article 39. As regards this line of argument, it is important — as we have already found in a number of cases — to realize in the first instance that the multiplicity of objectives listed in Article 39 and the consequent necessity of evaluation leaves the Community institutions wide room for discretion. It is therefore in this field a priori extraordinarily difficult to arrive at a finding of an abuse of discretion on the part of the Community institutions. A further point is that the relevant measures of encouragement have the effects envisaged by the objectives of Article 39 (a), (b), (c) and (d), that is they are covered by Article 39. That much can be said because the cultivation of durum wheat within the Community shows a deficit, because durum wheat can take the place of surplus products (common wheat and wine), because its cultivation permits a diversification of agricultural production and because in the case of the dry climatic zones it alone can be considered; so it must there be considered a necessary social measure. This however in the present context amounts to the really decisive finding. Indeed, for the purpose of Article 39 it must suffice that a measure comes within its ambit, that accordingly it can be regarded as suitable for the realization of the objectives there set out. Nowhere however in this provision or elsewhere in the Treaty is it provided that Article 39 can be used for the purpose of justifying a measure of agricultural policy only if it is indispensable, urgently necessary in connection with the attainment of the objectives of that Article. Even if, therefore, one could say that on account of the Community preference connected with the encouragement of the cultivation of durum wheat (in the light of the case law an important principle) the objective of maintaining trade so as to stabilize markets under Article 39 (c) had receded into the background, (in fact, as has been shown by the defendants, this is not the case), nevertheless all this would not amount to a case of disregard of Article 39. In no way could one speak of a flagrant disregard of this provision within the meaning of Case 5/71 (a clear infringement of a provision of superior law) or of an infringement of a provision amounting to a protective provision from the applicants' point of view. Accordingly nothing can be gained from the applicants' arguments which refer to Article 39 of the EEC Treaty to support their claims to compensation. (b) A further and rather more important argument relates to the infringement of the prohibition against discrimination. In this context the applicants argue that under the Community system for durum wheat the German mills processing durum wheat to cereal meal were in an appreciably worse starting position than their French competitors. The French mills were able to obtain their raw material on the basis of the low intervention price whilst the German mills were dependent upon imports from third countries and in this connexion had to pay the much higher threshold price. This difference was such that the German mills were no longer competitive within their traditional sales territory, let alone able to compete abroad, particularly in France. The difficulties described could however have been avoided by a reduction of the threshold price (possibly limiting this to the German and Benelux mills) or by a reduction of Community aid, i.e., by raising the intervention price. As against this the defendants as we know object that the applicants had looked at the matter in the wrong way. In their view it is not correct to use the comparison of costs that had been undertaken as a basis since the applicants were not dependent upon the supply of durum wheat from third countries but could perfectly well have obtained durum wheat produced in France on the same conditions as the French mills. If this happened, then the French mills only retained a certain geographical advantage which in their competition with German mills in Germany had only minimal effects and which could be absorbed in their profit margin. On the other hand, these arguments are emphatically criticised by the applicants. They argue that the German mills, even if they obtained French durum wheat, were, as compared with their French competitors, under a competitive disadvantage due to the increased transportation costs which could not be bridged by means of the profit margins of the mills. Therefore even looking at matters in the way which the defendants considered right, there had been a case of appreciable discrimination against the applicants by means of a provision that expects them to process French durum wheat. However, even more important is the fact that the German mills in fact do not to any appreciable extent succeed in purchasing durum wheat on the French market. They claim that in the relevant area of origin the production does not suffice to satisfy even French requirements and that the entry of millers from other territories into this market is fought off, particularly by means of the collection system that is practised there and the traditional connections between the producers of durum wheat and the regional mills. Let us now see how these complex arguments which lead to the central issue in this case, are to be judged in detail. (aa) In this connexion let us first undertake a comparison of the competitive conditions as they appear when the German mills obtain French durum wheat and let us go into the question whether it can indeed be accepted as a fact that German mills do not succeed in obtaining access to the French market in durum wheat to any appreciable extent. (i) As regards the first-mentioned point, I must point out immediately that in this connexion there are a number of points which have not been fully resolved. The defendants calculated the costs of French mills in disposing of their cereal meal within the Federal Republic and the costs incurred by German mills in acquiring French durum wheat. Taking into account the differing costs of freight (freight for cereal meal is said to be higher than freight for durum wheat, the latter being reduced by State grants) as well as the fact that by reason of the rate of extraction larger quantities of raw material have to be transported (the proportions being approximately 2: 3), they concluded that the French mills' competitive advantage within the Federal Republic amounted to, at the most, about 3 u.a. They take the view that this is an amount that can be absorbed in the course of competition, for it amounts to 15 % of the processing costs and is less than 2 % of the resale price. The applicants on the other hand consider this an erroneous way of putting matters. With corresponding calculations they arrive at a competitive advantage on the part of the French mills of nearly 6 u.a., since in their view it is necessary to put the prior freights of French mills at a figure lower than that assumed by the defendants, to take into account freight to the main customer in Stuttgart, and to include in the calculation the fact that it is not only a mill in Rouen, but also the mills in Paris, with even lower prior freights, that must be considered competitors. They argue that it is quite out of the question to bridge such a competitive advantage within the framework of a profit margin. In fact there can be no question of this even where one is dealing with an advantage of approximately 3 u.a., since German mills processing cereal meal from durum wheat operate on an average profit margin of just over 3 u.a. before tax and interest on capital; (in this connection they refer to a standard calculation sanctioned by the Federal German Minister for Economic Affairs which plays a part in a price agreement approved in a cartel case relating to common wheat mills and which if anything is on the low side for durum wheat mills). If, therefore, this argument were the crucial point for deciding the case one could not avoid the need for supplementary data, though even at this stage one feels entitled to criticize the applicants for not taking into account the fact that the French mills, in the event of substantial purchases by the German mills on the French market, would be forced increasingly to fall back on durum wheat from third countries at higher prices, which would certainly reduce their competitive advantage. However, I do not believe that this argument necessitates further data, (particularly for ascertaining freight costs and profit margins). For in reality there are other considerations that ought to be decisive. (ii) These are connected with the applicants' objection that German mills had not been able to obtain French durum wheat to any appreciable degree. In this connection you will recall that, first in their pleadings and again in reply to a question of the Court, the applicants stated what little success they had had, despite attempts made ever since 1968. (It is a fact that the durum wheat imports from France up to the 1971/72 marketing year only rose to around 13000 metric tons, that is, a minimal percentage in relation to the total processing undertaken by the applicants). In particular one can refer to what the applicants — producing proof in this respect — have stated in relation to their cooperation with importing firms (with some of whom they were legally associated) and with regard to the continuous contact which these firms maintained with French agents or with their own branch offices in Paris. Whilst such contracts have existed since the fifties and have led to largescale deliveries of common wheat, yet in the case of durum wheat it is said that they only resulted in limited imports of poor quality material after the harvest had taken place and coupled with instructions to observe silence about the matter. By way of example, even after the insertion of an advertisement in a French trade paper in the spring of 1972, as well as after making contact with Synprodur (a French trade association of producers, traders and unions for the durum wheat sector) in the spring of 1962 and strengthening such contacts in the autumn of that year, evincing interest in an outline agreement for over 50000 metric tons, this did not result in imports worth mentioning. Furthermore the applicants referred to the traditional French collection system and the close relationship existing between producers, collecting agencies and mills in conjunction with Synprodur and forming part of that organization. In this way (as is shown by an announcement in the trade publication ‘Le Petit Meunier’ of 6 November 1969) there had been contracts for cultivation with the collecting agencies and contracts for delivery with the mills for considerable quantities and for that reason only minimal quantities had reached the market upon which foreign buyers are after all in the first instance dependent (this is proved by inter alia drawing attention to the trade publication ‘Le Petit Meunier’ which during the 1971/72 marketing year contained only two announcements offering durum wheat). Finally the applicants also drew attention to the fact that the total harvest in the relevant French production area around Chartres (during the 1971/72 marketing year it amounted to around 250000 metric tons) corresponded approximately to the requirements of the French regional mills there established, so that there was in fact no surplus. If the matter is seen in this light, the French processing plants did indeed have an interest in securing this production for themselves, so as not to be dependent upon costly imports. However, the French growers of durum wheat also had a substantial interest in the maintenance of good relations with the French processers, who provide them with a guarantee of stability, since they have to proceed from the fact that foreign customers are not able in any case to bid in excess of the prices offered by the French processors, owing to the high costs of transport. We now have to ask ourselves what is to be thought of all these arguments. Now, in the first instance one will probably have to concede that in this context also some points of dispute will remain at the end of the proceedings and that some supplementary data on one or other aspect might be of assistance. Taken all in all I do however believe that the data supplied by the applicants, combined with familiar experience and one's knowledge of the market arrangements are sufficient for a proper decision to be reached. This decision can in my view only be the following: We are dealing with a market that has developed over a comparatively short time (the French production of durum wheat in the area of interest in this case has evidently risen from 10000 metric tons in 1964 to 167000 metric tons in 1969, finally reaching around 250000 tons in the year 1972). We are now faced with a production total which in the defendants' opinion cannot be significantly increased and which, we know, just about covers the French processors' requirements. In these circumstances, however, it seems entirely out of the question that parties from outside the national territory might within a short period of time (including in this term a number of years) succeed in appreciably increasing their purchases in this territory contrary to the vital interests of the French processors and against the interests of the producers in maintaining traditional sales channels There can certainly be no question at all of saying that there had been a real prospect of arriving at approximately the same proportion of national and third country wheat for both German and French mills by increasing the extent of German purchases. (For this would mean that French mills would be left with only half the French production). In further examining the matter one has to start from this fact, a fact which can be gathered from the market arrangements, (one need not think in terms of factors disturbing competition, e.g., abuse of a dominant position on the part of the French mills, which is now being examined by the Commission). But in reality all this amounts to no more than recognition of the fact that German mills are to a predominant extent dependent upon the supply of wheat from third countries based upon the higher threshold price and this forces one to examine whether, taken in conjunction with the fact that French mills are able to a predominant extent to process locally grown wheat enjoying a special price system, this can be said to result in a clear case of discrimination against German mills. (bb) As regards the calculations to be undertaken in this connection, the defendant Commission arrived at the conclusion that the French mills in disposing of cereal meal in Germany enjoyed a price advantage of at the most 8 ua per metric ton. Since this might be further reduced by a variety of factors it amounts on average to at the most DM 15-20 per metric ton, that is an amount which can still be absorbed in competition and which in the Council's opinion could even, under certain conditions. (e.g., intervention prices being substantially exceeded in France), almost completely disappear. The applicants oppose this with very different calculations. In their view the competitive advantage enjoyed by the French mills in the Federal Republic is considerably greater. In fact it amounts to more than 13 ua per metric ton and must therefore be regarded as grossly discriminatory. Besides, even of the average competitive advantage as calculated by the Commission, one may well argue that it is oppressive for the German mills. When we now go on to examine more closely this important issue in the case, we ought to do so in such a way that we examine first the method of calculation of French cost prices and then those of the German competitors, together with the different factors that are relevant in this connexion. (i) As we have seen, it is an important question in relation to the French cost prices whether the French mills were indeed able to buy on the basis of the intervention prices or at any rate close thereto (this is the applicants' view), or whether the Council is correct in stating that French mills had been obliged to purchase durum wheat at prices that exceeded the intervention prices by some 7 to 8 u.a. In this respect — and I should like to say this immediately — I did at the end of the day get the impression that the applicants rather than the Council presented the truer picture. I shall give you my reasons. As I see it, the Council in taking its view bases itself mainly upon the announcement in the September 1972 issue of ‘Le Petit Meunier’ However, there we are dealing with data which do not apply to the marketing year of interest in these proceedings (this also applies to the data mentioned in a letter of Synprodur of 28 September 1972 according to which a price exceeding the intervention price by some 5 u.a. per metric ton was anticipated). The Council further overlooks the fact that we are dealing here with stock exchange quotations, i.e., wholesalers' sale prices that probably apply to Paris, whilst according to the convincing explanations on the part of the applicants, the French mills acquired their raw material directly from the collecting agencies, i.e., at the wholesalers' purchase prices. Besides, further arguments in opposition to the Council's views can be found not only in the observations of the Commission which on the one hand acknowledges that figures are admittedly lacking in France in relation to market prices (due to the fact that the bulk of the durum wheat does not openly appear on the market) but which nevertheless proceeds from the basis that during the 1971/72 marketing year the level of intervention prices was in part not exceeded at all and was in part not exceeded to any substantial degree (a point of view for which the Commission produced plausible explanations, such as the fact that the French farmers had in any event achieved improvements in their income as a result of the transfer to the price system of the common market in agriculture, the fact that such improvements were also caused by the currency situation prevailing during that period and the fact that they lack an adequate organization for effectively defending their interests). Supporting the Commission's line of arguments are, further, the data in the issue of ‘Le Petit Meunier’ of October and November 1971, according to which the sale prices for durum wheat were close to the intervention prices. Pointers in the same direction are also provided by the Commission's replies to a parliamentary question (according to which the producer prices for French durum wheat during the 1968/69 marketing year amounded to 113.51 u.a. and during the 1969/70 year to 102.43 u.a.; i.e., taking into account a devaluation rate of 11.11 %, they were only insignificantly above the intervention price level). Last but not least one can also, in supporting the correctness of this assumption, point to the fact that there is no effective entry onto the French market (a market very much tied by traditions) by outsiders, a fact that otherwise could produce a rise in prices. One may therefore, without any more ado and without assuming that factors disturbing competition had played a part on the French market, proceed from the fact that the calculation of French cost prices in the main took place on the basis of the intervention prices. At any rate, if this level was exceeded to a certain extent, this does not entitle one to correct to any appreciable extent the aforementioned calculations which relate to the competitive advantage of French mills. As regards other factors concerning the calculation of French cost prices which were also discussed in the proceedings, e.g., prior freight of the French mills, profit margin of the collecting agencies, costs of unloading, the rate of extraction of the French mills and their alleged marginal calculation, I can be quite short because I am convinced that in the present context they are of no great importance. Thus in relation to prior freight, one can say that a correction in the sense suggested by the applicants does not affect the matter vey much. Furthermore we are here dealing with a problem of the individual centre which, in generally judging the appropriateness of a price system, hardly deserves attention. Profit margins of the collecting agencies and unloading costs can be disregarded when comparing costs since they equally apply in the case of imports from third countries. As regards the rate of extraction, we have heard that in connection with these calculations one assumes a standard rate of extraction; besides, it seems to be established that in this respect there is no longer any great difference between German and French mills. Finally, as regards the question of the so-called marginal calculation, i.e., the possibility on the part of French mills in a situation of expanding production, thus reducing costs, to exempt goods destined for export from the element of fixed costs, and likewise to transfer the increased price payable on the necessary purchase of additional wheat from third countries to the goods destined for the home market, we are here — as the defendants have rightly said — dealing only with a supposition on the part of the applicants, rather than with facts. If however such a marginal calculation did indeed have an effect, then it ought to be disregarded because it does not originate in a Community provision but was in any case facilitated by offences against the competition rules, the responsibility for which is not at present a matter for discussion. On the question of the calculation of French cost prices, therefore, the only real objection remaining is that, as has already been indicated, the French mills did not process only French durum wheat, but partly (to the extent of approximately 20 %) they also processed wheat from third countries, to which higher prices applied. One has to concede that this certainly affected the total calculation. However I consider it doubtful whether an appreciable effect could have resulted from this circumstance and it is doubtful in particular whether we are dealing here with an effect that could appreciably reduce the competitive margin which has been shown to exist. (ii) On the other hand as regards the calculations of the German mills, basically one only has to follow up two aspects to which the defendants have referred — leaving aside remarks concerning freight rates for Rhine cargo for the same reasons as the remarks concerning the French prior freights. There is on the one hand the fact that at the time in question the currency compensatory charges, already sufficiently known from other cases, were not raised on durum wheat imports from third countries; accordingly these imports were rendered correspondingly cheaper; there is the further fact that upon importation there was an opportunity of advance fixing, resulting in the threshold price level not being reached. As regards the first point however, one realises that currency compensatory charges were not levied on French cereal meal imports either. Even if the precise advantage resulting therefrom as compared with that arising on importation of third country durum wheat — consequent upon the failure to levy currency compensatory charges — is not precisely known (a relevant factor in this respect is the price level for durum wheat on the world market and for French cereal meal, as well as the different movements of the DM exchange rates in relation to the dollar and the French franc) one might yet, after hearing the arguments in the case, get the impression that the absence of the currency compensatory charges probably had no effect; at any rate that it does not oblige one significantly to revise one's comparison of costs (this after all is the reason why the Commission ignored this rather temporary state of affairs). On the question of advance fixing of levies upon the import of third countries wheat, which at that period was possible for a period of thirty days, there was admittedly no dispute that this could result in a reduction of import prices, amounting to possibly 2 to 3 u.a., or exceptionally even up to 6 u.a. However, for one thing it is not certain whether this advantage was effectively passed on by the importers to the mills or whether it was in part retained as compensation for the fact that in other cases advance fixing resulted in disadvantages. Besides, here too one is only dealing with average orders of magnitude which probably were not to any substantial degree capable of reducing the competitive difference indicated. Now, what about my conclusions? I consider that despite the points in dispute to which reference has been made and without submitting them to the examination of experts — a course that would certainly be useful — one must conclude that German mills did indeed suffer a detriment within their sales territory as compared to competing French undertakings (obviously there was no question at all of attempting any competition worthy of that name in France). Furthermore, one can also take it for granted that the detriment has assumed an extremely worrying extent, especially if compared with the profit margins shown by the applicants as typical in the case of the German milling sector. It follows that the existence of a serious, gross discrimination cannot be denied, i.e., a clear infringement of the obligation of equal treatment within the meaning of Judgment 5/71. (cc) Admittedly, before drawing further conclusions one must still go on to ask whether such a result could have been avoided under the total system of the organization of the market and whether accordingly it ought to have been avoided without causing prejudice to the system On this point, several possibilities could, as we saw, have been considered. One could have considered an alteration of the threshold price for durum wheat, i.e., a reduction to the level of the intervention price, or — for the sake of Community preference — 1.1 u.a. above that. One could have considered reducing the threshold price for Rotterdam only, and to have taken care that the reduction benefited only German and Benelux mills. Finally there would have been a possibility of increasing the intervention price by an appropriate amount, at any rate for the French production area relevant in this case. i) As for these possibilities, the defendants expressed serious misgivings above all in relation to the first one. One can immediately concede that these are not unfounded, that a general reduction of the threshold price for durum wheat would doubtless constitute a danger from several points of view for the pursuit of the legitimate objects of encouraging Community durum wheat production. Thus we have seen that one has to keep to a price differentiation as against common wheat (according to the world market factors a ratio of 100/118 applies). If it is not observed then this will result in an undesirable situation: the forcing out of common wheat by durum wheat. Since however at that time the threshold price for common wheat amounted to 107.25 u.a. there could really be no question of reducing the durum wheat threshold price to a level of 112.4 u.a. Just as important is the fact that a reduction of the threshold price also involves jeopardising domestic durum wheat production by imported durum wheat. With a reduction in the threshold price as advocated by the applicants there could no longer be said to be an adequate protected domestic production. Particularly in the areas in proximity to harbours, such as Genoa, where produce of third country origin is competing with durum wheat from southern Italy, there is reason to fear an increasing changeover to imported durum wheat. At any rate one must expect a possibility of national durum wheat prices stagnating, i.e., the possibility of their remaining at the intervention price level which might considerably reduce the incentive to cultivation. The Commission has rightly called attention in this context to the significant fact that the previous Italian threshold price was higher than the common threshold price. Particularly having regard to the interests of the main cultivation area for durum wheat (i.e., southern Italy) a further reduction of the threshold price was inconceivable, and this also applies to a reduction which for the sake of Community preference would have been 1.1 u.a. above the intervention price level. ii) The second possibility, i.e., the differentiated reduction of the threshold price by limiting it to Rotterdam (i.e., having regard to the imports effected by the Benelux mills and German mills) is also open to several objections and this is so even when, taking into account the fact that French mills also to some extent process wheat from third countries, a margin of 1.1 u.a. from the intervention price level is observed. One of the most weighty objections is that the uniformity of the market and of prices would thus be destroyed. Now it is admittedly correct that in other cases too deviations from this principle have been accepted (e.g., in the case of Italian cereal fodder imports where there was a reduction in the levy). One must not forget however that these were exceptional provisions of temporary applicability, not suitable for more universal application and from which in the absence of a factual connexion legal rights cannot be derived, particularly not by the applicants in this case. As regards the possibility which we are now considering, it must be added that if the advantage is to be limited to the Benelux mills and to the German mills, this would require a procedure to secure customs duties, ie., a device that must be regarded as a foreign body within the Common Market. Furthermore it seems clear that even in this case one cannot wholly exclude an element of indirect prejudice to the national durum wheat market, if only because cereal meal processed from imported wheat and produced by mills in proximity to the borders could displace cereal meal produced from home-grown wheat, or because in such a situation and in the absence of foreign demand one must at least expect a stagnation of French prices. Finally it is not without relevance in this context that this would result in an unequal treatment of mills in other Member States that likewise in part process material from third countries. However, to avoid such unequal treatment would also require a differentiated system for other areas of the Community. This, however, could necessitate a considerable degree of administrative effort and would mean the risk of similar demands for exceptional treatment being made in respect of other agricultural products, quite apart from the fact that the realization of the objects aimed at by encouraging durum wheat production would thus be prejudiced. iii) Accordingly this only leaves the third possibility to be seriously considered, that is raising the intervention price, at any rate for the region northern France at present under discussion. Under this heading it seems remarkable that it should have been argued in the proceedings that with durum wheat the gap between the threshold price and the intervention price is greater than with other kinds of cereals (e.g., in the case of rye, barley and maize, but also greater than in the case of common wheat, for which the threshold price in 1971 was around 107.25 u.a. whilst the average intervention price for the most important localities was around 98 u.a.). I was given further food for thought by the fact that earlier on (round about the 1968/69 marketing year) there was a higher intervention price for Rouen — around 117.50 u.a. — so that at that time they kept to a narrower margin from the threshold price (123.13 u.a.). This price ratio moreover applied at a time — and it must not be forgotten — when domestic cultivation was not yet very developed and when therefore a stronger demand for domestic durum wheat must have existed, encouraging prices to rise. The smaller margin to which I have referred, as between the threshold and the intervention price was evidently nevertheless regarded as sufficient for the protection of domestic production. In the light of this finding one cannot in my view avoid the question why later on — inter alia in the 1971/72 marketing year — and subsequent to an increase in domestic production a greater margin between threshold price and intervention price should have become necessary for its protection. We have heard no plausible explanation for this in the course of the proceedings. However, we ought now to draw the necessary conclusions from this. This means: without improperly interfering with the legislator's discretion it must be placed on record that in the 1971/72 marketing year there was a possibility of fixing the intervention price for durum wheat in Northern France at a higher level without jeopardizing the aims of the organization of the market for cereals. Such a measure being appropriate at the same time to reduce the distortion of competition existing as between German and French mills processing cereal meal from durum wheat and to bring this distortion back to an acceptable level, it is also clear that the applicants rightly refer to a system that discriminates to a substantial degree.