OPINION OF ADVOCATE GENERAL

POIARES MADURO

delivered on 26 October 2006 1( )

Case C-359/05

Estager SA

v

Receveur principal de la Recette des Douanes de Brive

(Reference for a preliminary ruling from the Tribunal de grande instance de Brive‑la‑Gaillarde (France))

(Provisions relating to the introduction of the euro – National rules which rounded the amount of the tax for the supplementary budget for agricultural social benefits after it had been converted into euros)

1. By this reference for a preliminary ruling, the Tribunal de grande instance de Brive-la-Gaillarde (Regional Court, Brive-la-Gaillarde) (France) has submitted to the Court a question concerning the interpretation of Council Regulations (EC) No 1103/97 of 17 June 1997 on certain provisions relating to the introduction of the euro ( ) and (EC) No 974/98 of 3 May 1998 on the introduction of the euro. ( ) More specifically, the reference concerns whether an increase in the amount of a tax on quantities of flour, meal and groats of common wheat which occurred at exactly the same time as the introduction of the euro and which was put into effect by an order adjusting the value in euros of certain amounts expressed in French francs in legislative texts is compatible with the Community rules on the conversion into euros of amounts expressed in a national currency.

I – Legal framework, facts and question referred

2. Article 1618 septies of the French Code Général des Impôts (General Tax Code) introduces a tax on the quantities of flour, meal and groats of common wheat supplied or used for human consumption (“the flour tax”), the amount of which was fixed, before the introduction of the euro, at FRF 100 per tonne of flour, meal or groats.

3. Article 1 of Law No 2000-517 of 15 June 2000 enabling the Government, by means of an order, to adjust the value in euros of certain amounts expressed in francs in legislative texts (JORF of 16 June 2000, p. 9063) authorises the Government, by means of an order, to take the measures necessary to adjust for the changeover to the euro certain amounts expressed in French francs in legislative texts.

4. Enacted pursuant to that law, Order No 2000-916 of 19 September 2000 adjusting the value in euros of certain amounts expressed in francs in legislative texts (JORF of 22 September 2000, p. 14877) fixed the amount of the flour tax at 16 euros from 1 January 2002.

5. Article 1 of that order provides that, ‘[i]n accordance with Article 14 of the Regulation of 3 May 1998 […], amounts expressed in francs in legislative texts […] shall be replaced, on 1 January 2002, by amounts in euros, in accordance with the official rate and the Community rules on rounding’.

6. The report to the French President on Order No 2000-916 (JORF of 22 September 2000, p. 14876) states:

‘[…]

The result obtained by applying [Regulations No 1103/97 and No 974/98] will, in certain cases, be difficult to read and remember, with the consequent risk that the texts in which the currency references at issue appear may be more difficult to apply.

In order to preserve the clarity of legislation and thus facilitate its proper application, it is therefore necessary to fix the monetary amounts provided for in certain texts at values expressed in euros without decimals or at more meaningful values.

[…]

This order, enacted pursuant to the above authorisation, is based on the following principles.

Firstly, since the adjustment of texts must be justified by the concern to preserve readability, only monetary amounts which, in this regard, cannot readily accommodate values including two figures after the decimal point are amended.

The pure and simple application of the Community rules on conversion and rounding must remain the rule and adjustments the exception. Accordingly, amounts already expressed in centimes are not generally amended.

[…]

All of these adjustments shall come into force on 1 January 2002, the date of the definitive and full replacement of the franc by the euro.

[…]’.

7. Since 1 January 2002, the company Estager (‘Estager’) has paid flour tax to the Recette des douanes de Brive (Customs Revenue Office, Brive) at the rate of 16 euros per tonne. Estager takes the view that it should have been taxed at a rate of 15.24 euros per tonne in accordance with Regulations No 1103/97 and No 974/98. In its submission, the adjustment by the French legislature of the amount of FRF 100 to 16 euros gives rise to an increase in that tax which is not in conformity with those regulations.

8. Article 3 of Regulation No 1103/97 states:

‘The introduction of the euro shall not have the effect of altering any term of a legal instrument or of discharging or excusing performance under any legal instrument, nor give a party the right unilaterally to alter or terminate such an instrument. This provision is subject to anything which parties may have agreed.’

9. Under Article 1 of that regulation, the term ‘legal instruments’ is to be understood as meaning ‘legislative and statutory provisions, acts of administration, judicial decisions, contracts, unilateral legal acts payment instruments other than banknotes and coins, and other instruments with legal effect’.

10. Article 4 of the same regulation provides:

‘1. The conversion rates shall be adopted as one euro expressed in terms of each of the national currencies of the participating Member States. They shall be adopted with six significant figures.

2. The conversion rates shall not be rounded or truncated when making conversions.

3. The conversion rates shall be used for conversions either way between the euro unit and the national currency units. Inverse rates derived from the conversion rates shall not be used.

4. Monetary amounts to be converted from one national currency unit into another shall first be converted into a monetary amount expressed in the euro unit, which amount may be rounded to not less than three decimals and shall then be converted into the other national currency unit. No alternative method of calculation may be used unless it produces the same results.’

11. Article 5 of that regulation provides, in addition:

‘Monetary amounts to be paid or accounted for when a rounding takes place after a conversion into the euro unit pursuant to Article 4 shall be rounded up or down to the nearest cent. […] If the application of the conversion rate gives a result which is exactly half-way, the sum shall be rounded up.’

12. Article 7 of Regulation No 974/98 provides:

‘The substitution of the euro for the currency of each participating Member State shall not in itself have the effect of altering the denomination of legal instruments in existence on the date of substitution.’

13. Article 14 of the same regulation states:

‘Where in legal instruments existing at the end of the transitional period reference is made to the national currency units, these references shall be read as references to the euro unit according to the respective conversion rates. The rounding rules laid down in Regulation (EC) No 1103/97 shall apply.’

14. Finally, under Article 1 of Council Regulation (EC) No 2866/98 of 31 December 1998 on the conversion rates between the euro and the currencies of the Member States adopting the euro, ( ) the conversion rate irrevocably fixed between the euro and the French franc is 1 euro = 6.55957 French francs.

15. Taking the view that the application of those regulations should of necessity have resulted in the amount of the flour tax being fixed at 15.24 euros and not at 16 euros, Estager, by letter of 12 March 2002, asked the Recette des douanes de Brive to refund part of the flour tax paid since 1 January 2002. On 25 March 2002, the authority rejected the request for a refund.

16. On 24 May 2002, Estager brought proceedings against the Receveur principal (Principal Collector of Revenue) at the Recette des douanes de Brive before the Tribunal de grande instance de Brive-la-Gaillarde, which decided to stay proceedings and refer the following question to the Court for a preliminary ruling:

‘Are the provisions of Order No 2000-916 […] that concern the conversion of the […] tax applied to the production of flour, meal and groats of common wheat, from FRF 100 to EUR 16 in conformity with the Community regulations in relation to the introduction of the euro?’

II – Analysis

17. It is not disputed by any of the parties in this case that, from the point of view of the simple application of the rules laid down in the Community regulations on conversion into euros and rounding, conversion of the flour tax amount of FRF 100 into euros would have given a result of 15.24 euros. After all, application of the official and irrevocable conversion rate between the euro and the French franc laid down in Regulation No 2866/98 would have given a result of 15.244 euros, which, when rounded to the nearest cent in accordance with Article 5 of Regulation No 1103/97, gives a final result of 15.24 euros.

18. The question is therefore whether a Member State, at the same time as and in the same legal instrument as that in which it substitutes euros for an amount corresponding to a tax in accordance with the official rate of conversion and the Community rules on rounding, is completely at liberty to increase that tax by almost 5% by upwardly adjusting the amount of 15.24 euros to the nearest euro, that is to say 16 euros.

19. The Court has already had the opportunity, in the judgment in Verbraucher-Zentrale Hamburg, ( ) to examine the question of the conversion into euros and rounding of amounts previously stated in a national currency unit. At issue in that case were the conversion into euros and rounding by a mobile telephone undertaking of certain per-minute telephone-call tariffs expressed in German marks.

20. The Court made very clear the purposes of Regulation No 1103/97 and the fundamental principles on which it is based. ( ) In particular, the purpose of guaranteeing legal certainty and transparency for economic agents during the transition to the single currency is ensured by the principle of the continuity of contracts and other legal instruments and by the objective that the transition to the euro should be neutral in relation to the amounts stated in a national currency in legal instruments. Indeed, it was on those very grounds that the Court held that, although an economic operator remains at liberty, under Regulation No 1103/97, to convert into euros and to round a charge such as a per-minute tariff unilaterally to the nearest cent, such a rounding practice must be consistent with the principle of the continuity of contracts and other legal instruments safeguarded by Article 3 of that regulation and with the objective pursued by that regulation that the transition to the euro should be neutral. Consequently, the Court found, such a rounding practice cannot have a real impact on the price actually to be paid by the consumer. ( )

21. Despite the clear differences between the situation at issue in this case and that in Verbraucher-Zentrale Hamburg, cited above, the principles and objectives held by the Court to be decisive for the interpretation of Regulation No 1103/97 in the context of Verbraucher-Zentrale Hamburg, cited above, are also valid in the context of this case.

22. It is true that the conversion into euros of an amount stated in a national monetary unit always entails some risk of variation in the value of the amount in question before and after conversion. However, it follows from Regulation No 1103/97, and in particular Article 5 thereof, that, for the purposes of compliance with the requirements of the continuity of legal instruments and the neutrality of the transition to the euro, the greatest tolerable inaccuracy in such a conversion is 0.005 euros. As the Court pointed out in the judgment in Verbraucher-Zentrale Hamburg, the objective that the transition to the euro should be neutral requires that the rules of conversion adopted in Regulation No 1103/97 ensure ‘a high degree of accuracy’. ( ) That high level of accuracy required by the regulation with regard to the rounding of amounts after their conversion into euros is, moreover, a minimum requirement. ( ) Furthermore, it is clear that, where an amount is converted into euros and rounded by an economic operator for the benefit of the economic agents who must bear the payment of that sum, Regulation No 1103/97 does not preclude observance of the standard requiring accuracy to the nearest cent. Contrary to the arguments raised, the reductions observed in the amounts to be paid or accounted for upon conversion into euros are clearly not contrary to the requirements of legal certainty and confidence for economic agents, in particular consumers, which inform Regulations No 1103/97 and No 974/98.

23. In this case, the French legislature, by Order No 2000-916, upwardly adjusted the amount of the flour tax, 15.24 euros, to the nearest euro, that is to say 16 euros. Such an operation gives rise to an increase in the amount of that tax which significantly exceeds the margin of variation tolerated by the Community rules concerning conversion to euros. This cannot therefore be said to be a rounding carried out in accordance with those Community rules.

24. According to the French Government, a Member State none the less remains at liberty to make an increase such as that introduced by Order No 2000‑916. The Commission of the European Communities shares that view.

25. Firstly, the French Government considers that Regulations No 1103/97 and No 974/98 did not in any way impinge upon the Member States’ powers of taxation or their right to increase the amounts of their taxes when they deem it appropriate to do so. In its view, the Member States remain free to make such adjustments in the same legal instruments as those in which they carry out operations to convert the amounts of those taxes into euros.

26. Secondly, the French Government considers that Order No 2000-916 introduces an adjustment of amounts which is conceptually distinct from conversion into euros. Only the latter operation must comply with the rules laid down in Regulations No 1103/97 and No 974/98. The adjustment of amounts, as an operation distinct from conversion into euros, allows the French legislature, in particular for reasons of the clarity and memorability of amounts, to make increases in taxes which have been adjusted in this way. So it is that the report to the French President on Order No 2000-916 states that ‘[t]he result obtained by applying [Regulations No 1103/97 and No 974/98] will, in certain cases, be difficult to read and remember, with the consequent risk that the texts in which the currency references at issue appear may be more difficult to apply’. It also states that, ‘[i]n order to preserve the clarity of legislation and thus facilitate its proper application, it is therefore necessary to fix the monetary amounts provided for in certain texts at values expressed in euros without decimals or at more meaningful values’. Similarly, in order to preserve the clarity of legislation, the same report provides that only currency amounts which cannot readily accommodate values including two figures after the decimal point are to be amended. According to the French Government, such an adjustment operation is not covered by the abovementioned Community regulations. Those regulations do not therefore preclude the Member States from making adjustments to amounts during the changeover to the euro such as that applied to the flour tax, which resulted in a significant increase in the amount of that tax.

27. The concept of adjusting amounts, which the French Government distinguishes from conversion into euros (the latter operation alone being covered by Regulations No 1103/97 and No 974/98), is central to its line of argument. In the view of the French Government, the fact that Order No 2000-916 makes an adjustment to the amounts of taxes, and in particular that of the flour tax, and that such an adjustment operation is not covered by those regulations, ensures that there is no incompatibility with those regulations.

28. I agree with the French Government and the Commission that the States participating in the euro remain free to adjust the amounts of their taxes, in particular for reasons of clarity, and that, of course, they remain free to decide to increase them when they deem it appropriate to do so. The Member States retain extensive fiscal powers, ( ) including, in particular, the power to increase a parafiscal tax such as that at issue here. None the less, they must exercise those fiscal powers consistently with Community law. ( ) Regulations No 1103/97 and No 974/03 unquestionably do not affect the ability of the public authorities to fix a new and higher amount for a tax such as that at issue here. ( )

29. The fact remains that, by Order No 2000-916, the French legislature expressly sought to apply the Community regulations when converting into euros amounts stated in French francs. Such an objective follows clearly, and primarily, from Article 1 of that order. That article provides that, ‘in accordance with Article 14 of Regulation [No 974/98] […], amounts expressed in francs in legislative texts […] shall be replaced, on 1 January 2002, by amounts in euros, in accordance with the official rate and the Community rules on rounding. ( ) It is clear from its own wording that that order is intended to substitute amounts in euros for amounts previously stated in French francs in certain legislative texts, in accordance with the official conversion rate and Regulations No 1103/97 and No 974/98.

30. The amount of the flour tax, fixed, after the introduction of the euro, at 16 euros in Annex IV to Order No 2000-916, is the result of an operation consisting simultaneously of conversion into euros (in accordance with the official rate and the Community conversion rules), on the one hand, and upward adjustment, on the other hand. It is precisely the simultaneous presence in the same legal instrument of such an adjustment together with conversion into euros and rounding in accordance with the Community rules that is implicit in Article 2 of Order No 2000-916 when it provides that, ‘in order to facilitate the application of legislation, the purpose of the provisions of Chapters II to IV is to adjust certain amounts in euros arising from the [Community] conversion rules referred to in Article 1’.

31. The difficulty in this case lies precisely in the simultaneous nature of the operations to convert the amount of the flour tax into euros and upwardly adjust the amount converted which were introduced by Order No 2000-916.

32. It is not contrary to Regulations No 1103/97 and No 974/98 for amounts to be converted into euros and upwardly adjusted in a single legal instrument. I take the view, therefore, that those Community regulations do not prevent a Member State from having the power to convert into euros and increase the amount of a tax at exactly the same time and in the same legal instrument.

33. However, the fact that that Member State decides to apply the Community regulations on conversion and rounding in order to restate the amount of a tax in euros, while simultaneously deciding to increase that tax, places on it an obligation, in exercising its powers, to comply with certain requirements arising from its application, at the same time, of those Community regulations.

34. It must be pointed out that the amount of the tax at issue in this case clearly constitutes a fixed ‘term’ of a ‘legal instrument’ within the meaning of Article 3 of Regulation No 1103/97. It is an amount which, at the time of the changeover to the euro, had of necessity to be converted. In accordance with the official rate and the Community conversion rules, such a conversion inevitably gave a result of 15.24 euros. In this regard, therefore, I do not concur with the view expressed by the Commission that Regulations No 1103/97 and No 974/98 lay down the rules to be observed when converting national currencies into euros only where the values expressed are supposed to remain constant, which would not be true of the amount of a parafiscal flour tax such as that at issue here, which can easily change on the decision of the public authorities. Neither the wording nor the objective of those regulations supports the contention that their application should be excluded in the case of amounts such as that of the flour tax, or even that of certain prices likewise subject to potentially frequent variations.

35. The rules laid down in Regulation No 1103/97, based on the principle of the continuity of contracts and other legal instruments and on the objective that the transition to the euro should be neutral, are applicable to an amount such as that of the flour tax at issue here. Those rules, which seek to ensure a high level of accuracy, do not, by virtue of either their wording or their purpose, tolerate any rounding-up to the nearest euro such as that which occurred in this case and which entails a significant increase in that tax of almost 5%.

36. As a ‘term’ in a legislative text, the amount of the flour tax at issue here is subject to the principle of the continuity of contracts and other legal instruments provided for in Article 3 of Regulation No 1103/97, which states that ‘[t]he introduction of the euro shall not have the effect of altering any term of a legal instrument’. In my view, the principle of the continuity of contracts and other legal instruments and the objective that the transition to the euro should be neutral also require that economic agents should not be under the misapprehension that it is the introduction of the euro which is at the root of an increase in the flour tax. It is not sufficient that the introduction of the euro is not actually directly responsible for the increase in that tax. This must also be readily apparent to economic agents.

37. The principle of the continuity of contracts and other legal instruments laid down in Article 3 of Regulation No 1103/97 must therefore be interpreted as meaning that it imposes an obligation of transparency on economic operators in the performance of operations which convert into euros fixed amounts contained in legal instruments and at the same time increase those amounts. This requirement of transparency, to which recital (7) in the preamble to Regulation No 1103/97 expressly refers, also follows from the high level of accuracy in conversion which is required by both the irrevocable euro conversion rates containing six significant figures, laid down in Regulation No 2866/98, and the strict rules on conversion to euros and rounding provided for in Regulation No 1103/97. ( ) Such an obligation of transparency is also incumbent on the Member States, in particular where they decide, in a single legal instrument, to convert into euros, in accordance with the relevant Community rules, an amount of tax such as that at issue here and, at the same time, adjust that amount by introducing an increase.

38. In other words, Regulation No 1103/97 requires that, where a Member State decides to increase a tax at the same time as and in the same legal instrument as that in which it seeks to replace the amount of that tax in accordance with the Community rules on conversion, economic agents must easily be able to distinguish between that which is, on the one hand, the result of the euro conversion operation carried out as part of the changeover to the single currency, and, on the other hand, the result of the sovereign decision of that State to adjust and increase the amount of that tax. It is a requirement aimed at safeguarding for economic agents transparency – a value expressly recognised by the Community legislature in recital (7) in the preamble to Regulation No 1103/97 – between two quite different processes: on the one hand, the conversion into euros of the amount of the flour tax, and, on the other hand, the increasing of that tax. Such transparency is also necessary for a proper understanding by European citizens of the division of political responsibilities between the Community and the Member States. A Member State may not transfer the political costs associated with increasing a tax to the Community by making that increase under the cover of applying the Community rules on conversion and rounding. Such conduct would also be contrary to the spirit of effective cooperation and loyalty between the Member States and the Community.

39. Article 1 of Order No 2000-916 establishes an express link between the new amounts in euros and the simple operation of conversion ‘in accordance with the official rate and the Community rules on rounding’. ( ) If the freedom existed for an increase in the flour tax to be introduced without distinction, that is to say under cover of the operation to substitute amounts in euros in accordance with the Community conversion rules, the principle of the continuity of contracts and other legal instruments and the objective that the transition to the euro should be neutral, which are expressly established in Article 3 of Regulation No 1103/97, would be infringed. It must be pointed out that the preservation of those requirements of continuity and neutrality is essential in establishing the confidence of economic agents in the euro. Such confidence is based on the guarantee that the conversion of amounts into euros once the single currency is introduced will not, in itself, lead to increases in those amounts.

40. If a Member State were at liberty, at the same time as it converts the amounts of its taxes into euros in accordance with the relevant Community rules, to introduce without distinction increases in those amounts, the rules laid down in Regulations No 1103/97 and No 974/98, which stipulate a high level of accuracy, would, in the final analysis, be no more than optional rules for the Member States. However, the Community regulations on conversion and the rounding of amounts in euros are not only applicable to private operators. The Member States are also subject to those Community rules when they convert into euros the amounts of their taxes, such as the flour tax at issue here. The fact that a Member State also has the power to increase those amounts, in the same way that an economic agent is also, in principle, at liberty to increase the price of the goods or services he offers on the market, does not mean that it is under any less of an obligation to comply with the Community rules on the conversion of amounts into euros.

41. That conclusion is actually reinforced by the reports cited by the Commission at the hearing, which state that ‘[t]he weight of the public sector in the economy means that the options it takes can serve as examples. Most public administrations intend to give the lead by organising the changeover of their tariffs in a manner that is neutral overall or favourable to citizens and by avoiding any increases during the changeover period’. ( ) Similarly, a different communication, also referred to by the Commission at the hearing, states that ‘[t]he public is increasingly concerned that it will be subject to abuses during changeover and there have been complaints in several countries about abusive price rises both in the public and in the private sector. Member States have committed themselves to public tariff conversion that is either neutral or in favour of consumers on balance […]’. ( )

42. The French Government and the Commission take the view that the French legislature observed the principle of the continuity of the terms of legal instruments and the objective that the transition to the euro should be neutral since it ensured overall neutrality. According to the Commission, such neutrality clearly permits the Member State to decide, with regard to the various amounts by way of tariffs or taxes contained in a single legal instrument, to increase some of those amounts at its discretion from 15.24 to 16 euros and to reduce other amounts from 15.24 to 15 euros. ( ) Overall neutrality operated in such a vague and imprecise fashion opens the door to all kinds of strategic choices as regards which amounts to increase and which to reduce. It is a far cry from the high level of accuracy which the Community legislature requires to be observed in the conversion of amounts into euros, and from the principle of the continuity of the terms of legal instruments and the objective that the transition to the euro should be neutral which are expressly established in Regulation No 1103/97. The amount corresponding to the flour tax is, in itself, a ‘term’ of a legal instrument which is quite different from the other amounts of other taxes also referred to in that same instrument. The economic agents who must bear the increase in the flour tax are not those who will benefit from any reductions in other taxes which have also been converted into euros by the same legal instrument. The amount of the flour tax is subject in itself, and not when viewed as part of an overall consideration of the amounts of the other taxes which have also been converted into euros by Order No 2000-916, to the requirements of continuity and neutrality.

43. For economic agents, in particular those in Member States which are in the process of deciding whether to join the single currency, the notion that the State is at liberty to convert into euros amounts relating to some of its tariffs or taxes and to increase them under cover of those conversion operations might adversely affect their confidence in the introduction of the single currency. The introduction of the euro would be seen by economic agents as being responsible for increases in taxation, when any such increase would be exclusively attributable to the authorities of the State, which alone are competent to introduce such an increase.

44. The principle of the continuity of contracts and other legal instruments and the objective that the transition to the euro should be neutral in relation to the amounts to be converted therefore mean that the upward adjustment of the amount of a tax such as that at issue here, when it occurs at the same time and in the same legal instrument as the conversion of that amount into euros, must be made in such a way as to be completely transparent to economic agents. It follows that, where an increase in the amount of a tax occurs at the same time as the conversion of that amount into euros, the legislative text providing for such simultaneous conversion and increase must draw an express and transparent distinction, in respect of each amount which has been simultaneously converted and increased in this way, between that which is the result of the conversion into euros and that which is the result of a decision by the public authorities to increase the amount of that tax. It is for the referring court to ascertain, in the light of the foregoing considerations, whether such transparency was ensured by Order No 2000-916 with regard specifically to the conversion into euros and increase of the flour tax.

III – Conclusion

45. In the light of the foregoing considerations, I take the view that the Court should answer the question referred by the Tribunal de grande instance de Brive-la-Gaillarde as follows:

Council Regulation (EC) No 1103/97 of 17 June 1997 on certain provisions relating to the introduction of the euro is to be interpreted as meaning that, where an upward adjustment of the amount of a parafiscal tax on flour such as the tax on quantities of flour, meal and groats of common wheat supplied or used for human consumption occurs at the same time as the conversion of the amount of that tax into euros, the legislative text providing for such simultaneous conversion and increase must draw an express and transparent distinction, in respect of each amount which has been simultaneously converted and increased in this way, between that which is the result of the conversion into euros and that which is the result of the decision by the public authorities to increase the amount of that tax. It is for the referring court to ascertain whether such transparency was ensured by Order No 2000-916 of 19 September 2000 adjusting the value in euros of certain amounts expressed in francs in legislative texts, with regard specifically to the conversion into euros and increase of the flour tax at issue in this case.