2.

With regard to Question 1 I have to observe that its wording is such as to give rise to doubts: this is all the more unfortunate in that the whole group of points making up Question 2 is conditional on an affirmative answer to Question 1. In fact, when the Finanzgericht asks whether Article 37 of the EEC Treaty is a lex specialis in relation to Articles 92 and 93 it seems to be advancing the view that the implementation of Article 37 takes precedence over compliance with the provisions of Articles 92 and 93 and may perhaps constitute an exception to them. However, when the Finanzgericht explains that it is referring to ‘State measures which affect the movement of goods between Member States and, where applicable, between Member States and third countries’ which may contain inter alia an aid and asks whether such measures must also be judged in the light of Article 37 the problem takes on a different aspect: ( 2 ) it is in fact assumed that measures of the sort described fall within the scope of Articles 92 and 93 and the doubt expressed is merely as to whether, in connexion with those articles, regard must also be had for Article 37 where the aids are related to a State monopoly of a commercial character. In sum it may confidently be taken the point raised by the Finanzgericht is the relationship between Article 37, on the one hand, and Articles 92 and 93, on the other: it is my view that this point should be treated generally and that thereafter consideration should be given to the various heads which constitute the second question. I wish to emphasize at the outset that Article 37 certainly cannot be interpreted as if it were intended to derogate from the provisions concerning aids granted by States. The general structure of Article 37 is in accordance with a number of the fundamental principles of the EEC Treaty: prohibition on discrimination between nationals of Member States regarding the conditions under which goods are procured and marketed and abolition of customs duties and quantitative restrictions. Any derogation from another fundamental principle (protection of freedom of competition, and the consequent restrictions on aids granted by States) would have required an express provision, which in fact was not included. Accordingly, even if the States make use of commercial monopolies in order to provide aids for specified undertakings, they remain fully subject to the provisions of Articles 92 and 93. Having established the foregoing it must nevertheless be borne in mind that where State aids are granted by means of a monopoly in order to promote the marketing of agricultural products regard must be had for Article 42 of the Treaty whereby ‘the provisions of the chapter relating to rules on competition shall apply to production of and trade in agricultural products only to the extent determined by the Council …’. In Article 4 of Regulation No 26 of 4 April 1962 the Council provided that ‘the provisions of Article 93 (1) and of the first sentence of Article 93 (3) of the Treaty shall apply to aids granted for production of or trade in the products listed in Annex II to the Treaty’. Article 92 is nowhere mentioned in the regulations. As the Court is aware Article 93 (1) requires the Commission, in cooperation with Member States, to keep under constant review all systems of aid existing in those States and empowers the Commission to propose to the latter ‘any appropriate measures required by the progressive development or by the functioning of the common market’. The first sentence of paragraph (3) requires that the Commission be informed in good time of any plans to grant or alter aid, but merely confers upon the Community institution the right to submit its observations thereon. Must it be inferred from this that in agricultural matters the limitations of substance on the power of the States to grant aids laid down in Article 92 and the concomitant attribution to the Commission of powers of decision in this sphere under Article 93 (2) no longer have effect? This was the view taken by the Commission in the reply which it gave on 9 December 1976 to Parliamentary Question No 543/76 on the adjustment of the monopoly in question (Official Journal C 23 of 31 January 1977, p. 12). It nevertheless appears to me that there are good grounds for doubting whether that interpretation is in accordance with the Community system. In its judgment of 10 December 1974 in Case 48/74 Charmasson ([1974] 2 ECR 1394) the Court of Justice stated inter alia that derogations which a national organization of the market may effect ‘from the general rules of the Treaty’ are only permissible to the extent necessary to ensure its functioning and in any event are limited to the transitional period. If, after the end of the transitional period, a common organization of the market has not been set up for products already subject to a national organization of the market the latter cannot operate in conflict with the general rules of the Treaty. Although in that case the problem arose essentially in relation to the prohibition on quantitative restrictions in intra-Community trade the general wording employed in the grounds for the judgment and the line of reasoning followed therein indicate that the duty of a national organization of the market to operate in accordance with the Treaty is not restricted to quotas. In the judgment in the Charmasson case more detailed reference is in fact made to the need for the ‘adaptation of a national organization to the rules provided for the establishment of the common market’; such rules undoubtedly include the prohibition on measures having an effect equivalent to quantitative restrictions and on charges having an effect equivalent to customs duties. In other cases the Court has emphasized the complementary nature of the relationship between those prohibitions and the prohibition on tax discrimination laid down in Article 95 of the Treaty; it thus appears logical to hold that that rule now applies in the agricultural sphere also, irrespective of the existence of a common organization of the market. Turning now to the problem of the applicability of Articles 92 and 93 to agricultural matters, it is important to note that the various regulations establishing common organizations of the market contain a provision stating that those articles apply to the sector governed by each particular organization. It is not, however, stated that it is necessary to establish a common organization of the market for every agricultural product. It is conceivable that certain sectors may operate satisfactorily, with regard to pursuit of the objectives set out in Article 39 of the Treaty, without its being necessary for them to come under a specific Community system containing measures for the direction of and intervention in production, marketing and prices, provided that the general rules concerning the establishment of the common market are observed. If, on the other hand, it were to be held that, even after the end of the transitional period, that is after the point indicated in Article 40 (1) of the Treaty as being decisive for the establishment of the common agricultural policy, the Member States should continue to enjoy a wide discretion in granting aids in the agricultural sectors which are not yet governed by a common organization of the market a situation incompatible with the full application of the abovementioned general rules to the sphere of agriculture would be rendered lawful. All Member States would, by the exercise of an unrestricted power to subsidize national undertakings, have in those sectors the possibility of hampering the movement of products of other Member States and of conferring a privileged position in matters of competition on domestic products. The granting of new State aids could become the means of reintroducing in another form restrictions on intra-Community trade and thereby of producing results similar to those arising from the measures which were considered to be at variance with the Treaty in the Charmasson judgment. I accordingly consider that, in the context of the system as it has been outlined in the light of the case-law of the Court of Justice, to continue to hold that the States have a free hand in the matter of aids in the agricultural sectors which are not yet (and perhaps never will be) governed by a common organization would distort that system. In accordance with the system of the Treaty it seems to me an inescapable conclusion that following the end of the transitional period the provisions of Articles 92 and 93 of the Treaty also apply to agriculture. I do not think it is a valid argument against that point of view to say that Regulation No 26 of the Council of 4 April 1962 merely declares (as I have noted above) that the provisions of Article 93 (1) and of the first sentence of Article 93 (3) alone shall apply. I doubt in fact whether that regulation, or at any rate that part of it, may still be regarded as being in force: more particularly whether Article 4 of Regulation No 26 is still in force. In this connexion it is worthy of note that all the provisions in the chapter concerning the rules on competition were declared to be applicable by the regulation in question (albeit with certain adjustments concerning Articles 85 (1) and 91 (1)) with the exception of Article 92, of Article 93 (2) and (3) — the latter as from the second sentence — and of Article 94. The reason for this pattern is indicated in the last recital of the preamble to Regulation No 26: it was intended that the Commission should be in a position ‘to draw up a list of existing, new or proposed aids, to make appropriate observations to the Member States and to propose suitable measures to them’; all of which was in order to ‘implement, as part of the development of the common agricultural policy, the rules on aids for production of or trade in agricultural products …’. The exclusion of Article 92, of a large part of Article 93 and of Article 94 was thus a transitional feature; furthermore, the whole of Regulation No 26 had a transitional purpose, as is indicated by the telling words of the first recital in the preamble (‘… the provisions hereinafter contained will have to be supplemented in the light of developments in that [common agricultural] policy’) and of the second recital (which provides inter alia for ‘the future establishment of a system of competition adapted to the development of the common agricultural policy’). Between 1962 and the present day there is no doubt that impressive developments have taken place in the common agricultural policy; I have already had an opportunity to emphasize that the provisions establishing common organizations of the market during that period have settled also the problem of State aids. At the same time the Court of Justice has upheld in its decisions the principle that the national organizations of the agricultural markets are subject to the basic provisions of the EEC Treaty. The conclusion which I think must be drawn from those factors is that Article 4 of Regulation No 26, having become incompatible with the system of Community rules at present governing agricultural matters, must be considered to have been abrogated on the ground of that incompatibility.