OPINION OF MR ADVOCATE-GENERAL WARNER

DELIVERED ON 15 JUNE 1977

My Lords,

This case comes to the Court by way of a reference for a preliminary ruling by the College van Beroep voor het Bedrijfsleven. It raises a somewhat abstruse question of interpretation of Council Regulation No 120/67/EEC of 13 June 1967, which, Your Lordships remember, established the common organization of the market in cereals, and which remained in force (subject to amendments made from time to time) until 1 November 1975, when it was superseded by a consolidating Regulation, Council Regulation (EEC) No 2727/75 of 29 October 1975.

The question is as to the correct method of computation of the levies payable on importations of maize from outside the Community effected in August 1974 by N. G. J. Schouten B. V. (which I shall call ‘Schouten’). Schouten is the plaintiff in the proceedings before the College van Beroep. The defendant in those proceedings is the ‘Hoofdproduktschap voor Akkerbouwprodukten’ (Central Board for Agricultural Products), which is the agency responsible in the Netherlands for the administration of the levies.

Your Lordships remember that, by the combined effect of Articles 2 and 5 of Regulation No 120/67, the Council was required to fix each year, in anticipation of the next marketing year, target prices, basic intervention prices and threshold prices for the main cereals covered by the Regulation, including maize. The target price for a cereal was the price that it was desired that it should fetch on the Community wholesale market (actually at Duisburg), whilst the threshold price was the minimum price at which it was estimated that imports of that cereal must enter the Community (at Rotterdam) in order not to fetch less than the target price. The Regulation also provided, by Article 6, that the target prices, intervention prices and threshold prices should be the subject of monthly increases phased over all or part of the marketing year. These increases too were to be fixed by the Council. Their purpose, as was evinced by the preamble to the Regulation, was ‘to take account, among other things, of storage costs and interest charges for storing cereals in the Community and of the need to ensure that the disposal of stocks conforms to market requirements’. In the period that is relevant for the purposes of this case, the marketing year for all the products covered by the Regulation, including maize, began on 1 August each year — see Article 3. (Although that Article was amended by Article 1 of Council Regulation (EEC) No 1996/74 of 29 July 1974, the amendment only affected a later period).

The purpose of the levies, as again the preamble to the Regulation makes clear, was to equate the price of imports of a product to the threshold price for that product. So the levy for each product was to equal the difference between the threshold price and the world market price of that product, the latter being expressed as a ‘cif price’, which was to be calculated by the Commission ‘for Rotterdam on the basis of the most favourable purchasing opportunities on the world market, determined for each product on the basis of the quotations and prices of that market …’ — see Article 13.

Article 15 (1) laid down the general rule that ‘The levy to be charged shall be that applicable on the day of importation’.

By way of derogation from that rule, Article 15 (2), which is the provision whose interpretation is in question in this case, introduced the system of advance fixing of levies, with which Your Lordships are familiar. As Your Lordships know, that system is tied to that of import licences, which was prescribed, so far as cereals are concerned, by Article 12 of the Regulation.

As amended by Article 1 (1) of Council Regulation (EEC) No 2429/72 of 21 November 1972 (OJ L 264 of 23. 11. 1972.), Article 15 (2) provided that, in the case of products including maize,

‘… the levy applicable on the day on which the application for the licence is lodged, adjusted on the basis of the threshold price valid in the month of importation, shall be applied, if the party concerned so requests at the same time as the application for the licence is made (the requests to be made not later than 1300 hours), to imports effected during the period of validity of the licence. In this case a premium, fixed at the same time as the levy, shall be added to the levy.’

(As I observed in my Opinion in Case 100/74 CAM v Commission [1975] ECR. 1393 at p. 1407, the authentic English text of Regulation No 2429/72 uses the word ‘certificate’ where ‘licence’ is obviously meant. I have, as then, corrected the mistake in quoting the provision. I should add that, although the Commission referred in its Observations in this case to the version of Article 15 (2) resulting from an earlier Council Regulation, No 2434/70 of 30 November 1970, it seems clear first that it was the version resulting from Regulation No 2429/72 that was in fact in force in 1974 and secondly, from the relevant citation on p. 5 of the Order for Reference, that it was this version that the College van Beroep considered. There is, however, so far as this case is concerned, no difference of substance between the two versions).

Regulation No 120/67 did not itself indicate the purpose of the ‘premium’ provided for by Article 15 (2). It confined itself to saying, by Article 15 (4), that the Council was to adopt rules for fixing the scale of premiums and, by Article 15 (5), that the scale of premiums was to be adopted by the Commission.

Since, however, the amount of a levy was to depend on two variables, the Community threshold price and the world market price, expressed as a cif price, it was logical that, in fixing a levy in advance, those two variables should be taken into account. Adjustment of the levy ‘on the basis of the threshold, price valid in the month of importation’ was expressly provided for by Article 15 (2) itself. Its adjustment by reference to the relevant forward cif price was in fact the purpose of the premium.

That was shown by Council Regulation No 140/67/EEC of 21 June 1967 (OJ L 2456/67 of 26. 6. 1967), which was adopted pursuant to Article 15 (4) of Regulation No 120/67. The preamble to Regulation No 140/67 recited, among other things, that ‘the common threshold price is the Community market's sole protection and … if imports were to enter this market at prices below the threshold price, the normal disposal of home-grown cereals … would be seriously threatened; … it is therefore necessary, where the levy has been fixed in advance, to fix the premium provided for in Article 15 (2) of Regulation No 120/67/EEC so that the product imported under this procedure may enter the Community market under conditions which cannot disturb its balance; … to this end it is necessary that this premium should cover the difference between the cif price and a cif forward delivery price, where the latter is lower than the former, determined on the basis of offers reflecting the real trend of the future market; …’. Consistently with that purpose, Article 2 of the Regulation provided in effect that, where the cif forward delivery price was less than the current cif price, the rate of premium should be equal to the difference between the two. The mode of calculation of the cif forward delivery price was prescribed by Article 3 (2), and Article 4 provided for differences of 0.125 units of account per metric ton, or less, to be ignored. There was no provision for a negative premium or for any other adjustment of the levy where the cif forward delivery price exceeded the current cif price.

Thus, as Your Lordships see, any adjustment of a levy under Article 15 (2) would normally be upwards. Article 6 of Regulation No 120/67 provided for the fixing of increases in threshold prices over a marketing year, but there was no provision for their reduction during the course of such a year. Regulation No 140/67, for its part, provided for the fixing of premiums when forward cif prices were below current cif prices, but there was no provision for any diminution of the levy when the opposite obtained.

An exceptional situation could however arise where an application for the advance fixing of levies was coupled with an application for an import licence spanning the end of one marketing year and the beginning of the next. For then it would be possible for the threshold price valid in the month of importation to be lower than the threshold price applicable on the day when the application for the licence was lodged. This is what happened in the present case. The importations effected by Schouten in August 1974 (the first month of the marketing year 1974/75) were effected under import licences and advance-fixing certificates applied for by Schouten in June 1974 (the penultimate month of the marketing year 1973/74).

The threshold prices for cereals for the marketing year 1973/74 were fixed by Council Regulation (EEC) No 1964/73 of 17 July 1973. The threshold price thereby fixed for maize was 100.65 u. a. per 1000 kg. The monthly price increases for that year were fixed by Council Regulation (EEC) No 1966/73 of the same date. The increase in the threshold price for maize for June and July 1974 was to be 6.80 u. a. per 1000 kg. The effective threshold price for maize for those months was therefore (100.65 plus 6.80 =) 107.45 u.a. per 1000 kg. The threshold prices for the marketing year 1974/75 were fixed by Council Regulation (EEC) No 1427/74 of 4 June 1974. That for maize was fixed at106.60 u. a. per 1000 kg. There was of course no increase under Article 6 for August 1974, so that there was an effective reduction, as between June/July 1974 and August 1974, of (107.45 less 106.60 =) 0.85 u.a. per 1000 kg.

I understood the Commission to say that such a situation had never arisen before 1974 and that it has never arisen since. So the problem to which it gave rise and with which the present case is concerned is probably in that sense unique.

That problem may perhaps best be apprehended by considering the figures shown in one of Schouten's advance-fixing certificates, copies of which were put in on behalf of Schouten at the hearing. This was Certificate No 3/412175 issued by the defendant on 14 June 1974. It was for 5000 tons of maize and covered the period from that date to 12 August 1974. The levy for June was shown as 0.45 guilders per 1000 kg. The levy for July was shown as 5.30 guilders. The difference of 4.85 guilders between those two figures is, as was explained to us at the hearing, accounted for by the premium. For August the same figure of 5.30 guilders was shown but subject to a note to the effect that it might have to be adjusted on the basis of the threshold price valid in the month of importation (‘Heffing aan te passen in functie van de drempelprijs van toepassing op de dag van invoer’). The reason for this, as was also explained to us at the hearing, was that, although Regulation No 1427/74 fixing the threshold prices for 1974/75 had been adopted on 4 June and published in the Official Journal of the Communities on 8 June, its contents had not yet percolated to the defendant or to Schouten when the Cerfiticate was issued.

Your Lordships have it in mind that there was in fact a reduction of 0.85 u. a. in the threshold price of maize between June/July and August 1974. We were informed that the equivalent of this in Dutch currency was 2.90 guilders, i.e. more than the bare levy for June (0.45 guilders) but less than the amount of that levy increased by the premium (5.30 guilders).

The rival contentions are these. Schouten contends that the reduction of 2.90 guilders should have been applied to the whole 5.30 guilders, leaving it with a net liability for levy of 2.40 guilders per 1000 kg. The defendant and the Commission contend that the reduction was to be applied only to the levy for June (0.45 guilders), thereby making it nil, and that the whole of the premium, 4.85 guilders, remained payable. It is between those contentions that Your Lordships have to decide. The question referred to the Court by the College van Beroep is:

‘Must Article 15 (2) of Regulation No 120/67/EEC of the Council be interpreted to mean that a variation of the threshold price in force during the month of importation from the threshold price in force on the day on which the licence is applied for results in a corresponding adjustment of the levy in force on that day — that is to say, of the levy fixed — as increased by the premium, or in a corresponding adjustment of the levy alone, so that the premium, regardless of the nature and size of the variation in the threshold price, is always chargeable in full?’

Before I express any opinion as to the answer to that question I must recall one other aspect of the history of the case, which is recorded in the Order for Reference and which was referred to in the course of argument.

In a letter dated 1 September 1976, by which the defendant rejected Schouten's objections to assessments to levy made upon it on the basis contended for by the defendant and the Commission, the defendant said that, as early as August 1974, it had become aware of a difference in the way in which Article 15 (2) had been interpreted in such circumstances in different Member States and that it had asked the Dutch Ministry of Agriculture and Fisheries to raise the matter in the appropriate quarter in Brussels. As a result of that, the matter was considered at a meeting of the Management Committee for Cereals on 5 September 1974. A report of that meeting, annexed to the defendant's letter, reads as follows:

‘Interpretation of Article 15 (2) of Regulation No 120/67

The abovementioned article provides that the import levy shall be adjusted for the threshold price valid for the month of importation, with, in given circumstances, the addition of a fixing premium to the levy.

In the transition from the previous marketing year to the new marketing year, there were, particularly as respects maize, import licences in circulation in which an import levy was fixed lower than the drop in the threshold price as at 1 August last. There was a fixing premium in force for importation in August. The Netherlands delegation had repeatedly pointed out that in Belgium a system was applied whereby the import levy fixed was first increased by the fixing premium and the amount of the price reduction was then deducted from the total. In other Member States the levy fixed is first reduced by the amount of the price reduction (the resulting amount can however never be less than o) and then increased by the premium. The Netherlands delegation had repeatedly asked the Commission to give a ruling on the correct interpretation of the abovementioned article because imports were being made into the Netherlands on licences issued in Belgium.

The Commission and the Member States are agreed that a strict application of this article leads to results which were never intended, namely importation at a price above the threshold price. Nevertheless the wording allows of no other interpretation; the system applied in Belgium is incorrect. It is agreed that licences presented in the Netherlands shall be dealt with on the basis of the amounts stated therein and that at a later stage the whole system of adjustment to the threshold price in the month of importation and the determination of premiums shall be discussed’.

We were told on behalf of the Commission at the hearing that the discussion in the Committee had been informal and brief. The representative of the Commission had expressed its view as to the correct interpretation of Article 15 (2) and no representative of any Member State had dissented. Your Lordships observe that the basis of that view was that, although it led to a result not intended by the legislation, the wording of Article 15 (2) allowed of no other interpretation.

That indeed was, essentially, the argument put forward by the Commission in this Court. The Commission pointed to the fact that Article 15 (2) had two sentences, the first referring to the adjustment of the levy on the basis of the threshold price for the month of importation and the second to the addition of the premium. That, said the Commission, connoted that those were two separate operations, and that a change in the threshold price could not entail an adjustment of the premium.

I do not find the language of Article 15 (2) so compelling. Manifestly, its authors had in mind the normal case where the threshold prices for the future months to be covered by an import licence would be known at the time of the application for the licence and where any adjustments by reference to them would be upwards. To add to a levy adjusted in such circumstances the amount of any premium applicable would give rise to no problem. It was natural to describe those two operations in successive sentences. The description, however, simply does not fit a case where the threshold price for a month covered by the licence is unknown at the time of the issue of that licence. Any adjustment by reference to that price must necessarily take place subsequently, which means that it must take place after the addition of the premium. If one rivets one's attention to the wording of Article 15 (2), and interprets it in the way suggested by the Commission, one is forced to the conclusion that it does not deal with that eventuality. Of course the real problem in the present case arises, as I have indicated, because the adjustment by reference to the threshold price in the month of importation had to be downwards. So one is tempted to ask what guidance the wording of Article 15 (2) would give where the threshold price for a future month was known at the time of the issue of the licence but was such as to call for a downward adjustment of the levy. As to that it seems to me, again, that that wording affords no clear guidance. True it mentions the adjustment of the levy by reference to the threshold price before it mentions the addition of the premium, which is what gives force to the contention of the Commission, but the second sentence says that the premium is to be ‘fixed at the same time as the levy’ and that it is to be ‘added to the levy’, which suggests that there is to be but one operation and that it is one that involves the premium becoming part of the levy.

The wording of Article 15 (2) being thus, in my opinion, at the very least equivocal, I think it must be interpreted in the light of the purpose of the legislation of which it forms part. As to this there can be no doubt. The purpose was to secure that cereals should not be imported into the Community from outside it at a total cost such as to enable them to undercut the target price. Hence the basic idea of the imposition of a levy equal to the difference between the threshold price and the cif price current at the date of importation. The object of the system of advance fixing of the levy was to enable traders to enter into forward contracts without being subjected unnecessarily to risks arising from unforeseeable increases in the levy. It was designed to secure that a trader entering into a forward contract would be liable for a levy of an amount which, when added to the price he had to pay under that contract, would bring it up to the level of the threshold price applicable at the time of his importation. It was not designed to impose on such a trader a fortuitous additional burden unrelated to the object of the system. This, admittedly, Article 15 (2) would have done if interpreted in the manner contended for by the Commission. So I think that that interpretation is erroneous.

In saying that, I do not overlook the absence from Regulation No 140/67 of any provision for the reduction of a levy when the cif forward delivery price was higher than the current cif price, or that this could result in a levy being unnecessarily high, in the sense that it might lead to the total cost of an importation exceeding the threshold price. But there is an important difference between that anomaly (taking it to be one) and the anomaly which the Commission says in the present case inevitably results from Article 15 (2). When forward cif prices exceed current cif prices, a trader can be expected to be aware of the fact and to conduct his business in the light of it. He can refrain from buying forward or, at all events, refrain from applying for advance fixing of the levy. But a future diminution of the threshold price is something that lies wholly in the discretion of the Community Institutions and that is not always foreseeable by a trader. I can see no justification for a trader being nonetheless required to take the risk of being thereby left landed with uncompetitive imports. In any case the existence of one possible anomaly does not entail that one should lightly accept the existence of another.

I must lastly mention a subsidiary argument that was put forward on behalf of Schouten. This was to the effect that the form of the advance-fixing certificates with which it had been issued gave rise to a legitimate expectation on its part that any reduction in the threshold price for August would be deducted from the total levy fixed by those certificates, including the premium. On the view I take, it is not necessary to consider that argument, but I agree with the Commission that the form of the certificates actually issued to Schouten by the defendant could not affect the interpretation of the relevant Community legislation. At best it might afford Schouten a remedy under national law. As to that I say nothing, for this Court is not concerned with it.

In the result I am of the opinion that the question referred to the Court by the College van Beroep should be answered by saying that Article 15 (2) was to be interpreted as meaning that a variation of the threshold price in force during the month of importation from the threshold price in force on the day on which the licence was applied for resulted in a corresponding adjustment of the levy in force on that day as increased by the premium.