5.

Solution of the issues in the first group requires Regulation (EEC) No 101/77 to be considered in relation to the Community provisions which preceded it and especially in the light of the rules laid down by the regulations of the Council, to which the Commission's exercise of its power to make regulations is, of course, subject. As has already been stated, the provisions which must be taken into account are both those which form the basis of the system of monetary compensatory amounts (Regulation (EEC) No 974/71 of the Council and Regulation (EEC) No 572/76 of the Commission) and those on the common organization of the market in sugar (Regulation (EEC) No 3330/74 of the Council and Regulation (EEC) No 458/73 of the Commission). The plaintiffs in the action pending before the French court contend (a) that Regulation (EEC) No 974/71 gave the Commission no authority to introduce monetary compensatory amounts for products, like sugar in excess of the maximum quota, which are not covered by a Community intervention system; (b) that the Commission could not make changes of substance in Regulation (EEC) No 3330/74 by introducing the said compensatory amounts; and (c) that the assignment of C sugar export licences, which was authorized by Regulation (EEC) No 458/73 and subject to the payment of a lump sum for the benefits derived therefrom, could not be made subject to a further charge by Regulation (EEC) No 101/77 unless Regulation (EEC) No 458/73 had been repealed. I shall deal with these three contentions in that order. With regard to the argument appearing under (a), my first comment is that the compensatory amount provided for under Regulation (EEC) No 101/77 does not cover each and every quantity of sugar produced in excess of the maximum quota (‘C sugar’). On the contrary, C sugar is subject to the system of compensatory amounts in so far as it is exported from a Member State other than that in which it was manufactured; furthermore, it is only in circumstances where the compensatory amounts must be paid at the time of exportation (that is to say, in the case only of exportation from weak-currency countries) that this system applies. The reason for these restrictions is to be found in the recognition, contained in the second recital in the preamble to Regulation (EEC) No 101/77, that the exportation of C sugar may give rise to deflections of trade ‘since it may be replaced in intra-Community trade by sugar which has been produced within the limits of the quota and is thus subject to the application of compensatory amounts’. In short, therefore, sugar which, under Regulation (EEC) No 101/77, incurs the burden of the levy as a compensatory amount is really A or B sugar exported under the fictitious cover of an export licence for C sugar. In consequence, the amendment which Article 1 of the regulation in question makes to Footnote (1) to Part 7 of Annex I to Regulation (EEC) No 572/76 does not consist in cancelling the provision under which compensatory amounts do not apply to C sugar (in terms, to ‘sugar exported to non-Member countries pursuant to Article 26 of Regulation (EEC) No 3330/74’). That provision continues to hold good and it is expressly reproduced in Regulation (EEC) No 101/77 but is limited on the lines indicated, that is to say, the compensatory amount shall be levied ‘where the customs export formalities are completed in a Member State other than that in which the export licence was issued’. These are important considerations in determining whether Regulation (EEC) No 101/77 is valid in the light of Article 1 (2) of Regulation (EEC) No 974/71 of the Council. Under subparagraph (a) of that provision, monetary compensatory amounts are applicable above all ‘to products covered by intervention arrangements under the common organization of agricultural markets’. When Regulation (EEC) No 101/77 was adopted, C sugar produced in excess of the maximum quota was excluded from Community intervention measures and, specifically in order to avoid its burdening the intervention arrangements, manufacturers were required under the common organization of the market in sugar to export it to non-Member countries. But the product referred to by Regulation (EEC) No 101/77 is, as has been said, A or B sugar, exported under licences for C sugar. What happened in the present case was that, in connexion with an exportation of this kind (that is to say the exportation of French sugar covered by the licence for German C sugar), it was possible for an equivalent quantity of German sugar produced in excess of quota to come within the category of sugar produced within the quota. In these circumstances only in the strictly technical sense can it be said that the monetary compensatory amount has been levied on a product not subject to intervention measures (C sugar); in reality, the levy prevented a product subject to the intervention measures from escaping the application of the machinery of compensatory amounts. An interpretation of Article 1 (2) (a) of Regulation (EEC) No 974/71 other than one which is purely literal and formalistic leads to the conclusion, therefore, that this provision can constitute authority for the measures adopted in Regulation (EEC) No 101/77. On the other hand it is impossible to ignore the argument which can be react into Article 1 (2) (b) of the Council regulation under whose terms compensatory amounts shall apply also ‘to products whose price depends on the price of the products referred to under (a) and which are governed by the common organization of the market’. There can be no doubt that all sugar, including that produced in excess of the maximum quota, comes under the common organization of the market; it is indeed by virtue of that organization that C sugar which must, as a general rule, be sold outside the Community, can be substituted for this purpose by another producer's A or B sugar. Both the existence of this obligation and the possibility of substitution to which I have referred go to show that Quota C sugar is subject to the common organization of the market. But the provision to which I refer also requires that the price of the product (to which, in theory, intervention measures do not apply) shall depend on the price of products which are covered by intervention measures. However, precisely because C sugar must be sold on the world market without qualifying for any refund from the Community, it has a price of its own related exclusively to the level of prices on the world market. However, at this juncture, it must again be pointed out that the commodity which is the subject of the measures laid down in Regulation (EEC) No 101/77 is A or B sugar of a weak-currency Member State exported under a licence for C sugar. Even though this commodity is treated as though it were a product in excess of the maximum quota it cannot be regarded simply as the same product. Its real price, that is to say the actual price which is obtained by exporting it in place of the C sugar of a Member Sute whose currency has been revalued, is certainly higher than the price fetched on the world market. It is reasonable to assume that, as the Commission pointed out, the producer of A or B sugar agrees to be involved in the substitution operation only in so far as he profits from it. He will accordingly take a share of the profit made at the expense of the intervention machinery by the producer of C Quota sugar as a result of the substitution. Thus, the actual price of the exported commodity, calculated as the total proceeds of its sale for export as C Quota sugar, is in the end also dependent on the price of the products for which intervention measures are laid down under the common organization of the market. A producer in a weak-currency State will in fact manage to obtain a price which is higher not only than the price of the product on the world market but also than the price guaranteed to him by the intervention machinery since it must be presumed that the combination of this machinery with the system of monetary compensatory amounts produces a higher return than that which would have been obtained by selling his Quota A or Quota B sugar as such. When, therefore, due regard is paid to economic realities, it must be accepted that, in the case under review, the actual price of A or B sugar which replaces C sugar for exportation to non-Member countries does in fact depend on the price of products for which Community intervention measures are laid down. In view of this, Regulation (EEC) No 101/77 can be regarded as justified at least on the basis of subparagraph (b), even if not on the basis of subparagraph (a), of Article 1 (2) of Regulation (EEC) No 974/71 of the Council.