CELEX: 61981CC0104
Language: en
Date: 1982-05-05 00:00:00
Title: Opinion of Mr Advocate General Rozès delivered on 5 May 1982. # Hauptzollamt Mainz v C.A. Kupferberg & Cie KG a.A.. # Reference for a preliminary ruling: Bundesfinanzhof - Germany. # Free trade agreements - Tax discrimination. # Case 104/81.

OPINION OF MRS ADVOCATE GENERAL ROZÈS
      DELIVERED ON 5 MAY 1982 (
            1
         )
      
         Mr President,
      
      
         Members of the Court,
      
      The origin of the present case is an application for a preliminary ruling by the Bundesfinanzhof [Federal Finance Court] concerning, as in the Polydor case which this Court decided very recently (judgment of 9 February 1982), the interpretation of a provision of the Agreement signed on 22 July 1972 in Brussels between the European Economic Community and the Portuguese Republic and concluded and adopted on behalf of the Community by Regulation No 2844/72 of the Council of 19 December 1972.
      The facts are as follows:
      In August 1976 the plaintiff in the main action, C. A. Kupferberg & Cie. KG a. A., a partnership limited by shares, Mainz, cleared through customs and released for free circulation in the Federal Republic of Germany port wines from Portugal.
      The product is made by stopping fermentation of the basic product which is wine; the ultimate alcohol content is obtained by adding products from the distillation of wine. According to the definition in Article 2 of Regulation No 948/70 of the Council of 26 May 1970 port wine comes under “liqueur wine” within the meaning of the Branntweinmonopolgesetz [Law on the Monopoly in Spirits]. According to paragraphs 151 and 152 of the Branntweinmonopolgesetz the importation of liqueur wines is liable to Monopolausgleich [monopoly equalization duty] in respect of its alcohol content in excess of 14% by volume, which duty corresponds respectively, as has been learned from previous cases, to the duty on spirits or the spirits surcharge (“Branntweinaufschlag”).
      In accordance with those provisions the Hauptzollamt levied equalization duty of DM 18103.80 on the alcohol content of the port wines in excess of 14 % by volume at the rate in force at the time of DM 1650 per hectolitre of wine-spirit.
      Kupferberg & Cie. brought an action before the Finanzgericht Rheinland-Pfalz [Finance Court, Rhineland-Palatinate] which varied the decision and reduced the monopoly equalization duty to DM 16303.80. In that respect the Finanzgericht took account of the fact that for spirits distilled from fruit which were used in making national liqueurs it was necessary to reduce the surcharge on alcohol by 21% pursuant to paragraph 79 (2) of the Branntweinmonopolgesetz in so far as the spirits are produced by cooperative fruit distilleries which are also entitled to process the wine. The question whether at the date of importation the national cooperative fruit distilleries actually made products by distilling wine is irrelevant in the view of the Finanzgericht since in any event the Branntweinmonopolgesetz provides for such possibility, which involves discrimination under that law vis-à-vis similar imported products derived from wine-spirits.
      Upon appeal on a point of law by the defendant Hauptzollamt the Bundesfinanzhof, by order dated 24 March 1981, stayed the proceedings. Pursuant to Article 177 of the Treaty it is asking this Court whether the prohibition of discrimination laid down in the first paragraph of Article 21 of the Agreement between the EEC and Portugal is a directly applicable provision on which the respondent may rely. The Bundesfinanzhof considers that in the event of an answer in the affirmative the additional question arises whether that provision has the same effect as Article 95 of the EEC Treaty and whether it applies to the importation of port wines.
      Only in the event of an answer in the affirmative to those questions does the Bundesfinanzhof wish to know whether Article 95 of the EEC Treaty or the first paragraph of Article 21 of the Agreement between the EEC and Portugal applies even if there is only potential discrimination, that is to say if there is from the strictly legal point of view a possibility of discrimination which is in fact excluded because the national products to be compared are subject without exception to the same duty as imported products. Since the German rules on taxation make an additional distinction on the one hand between fortified wines and on the other wines whose alcohol content is due to natural fermentation the Bundesfinanzhof asks the Court whether in view of the comparison of taxation which it is necessary to undertake under Article 95 of the Treaty port wine is not only similar to national liqueur wines but must also be compared to wines whose alcohol content is due to natural fermentation.
      I —
      For reasons of logic the Seventh Senate of the Bundesfinanzhof rightly asks first of all whether the first paragraph of Article 21 of the Agreement between the EEC and Portugal is directly applicable inasmuch as traders may rely on that provision before national courts. The paragraph is worded as follows:
      “The Contracting Parties shall refrain from any measure or practice of an internal fiscal nature establishing, whether directly or indirectly, discrimination between the products of one Contracting Party and like products originating in the territory of the other Contracting Party.”
      As you know, in the Polydor case the Court of Appeal in London had already asked whether a provision of the Agreement between the EEC and Portugal is directly applicable. That case was concerned with the obligation in Article 14 (2) to abolish quantitative restrictions on imports. In its judgment of 9 February 1982 the Court did not expressly deal with that question in view of the answer given to the other questions. In the present case however, I share the opinion put forward in this respect by the Governments of Denmark, the Federal Republic of Germany, France and the United Kingdom, as well as by the Commission, that it is difficult not to give an opinion on the question whether the first paragraph of Article 21 of the Agreement between the EEC and Portugal confers rights which may be relied upon before national courts.
      Since I have already given my view in that respect in my Opinion in the Polydor case I shall content myself with recalling the principal reasons why I think that question should be answered in the negative.
      First of all nothing as to the effect of its various provisions may be inferred from the form of the legal measure by which the Council concluded and adopted the Agreement on behalf of the Community.
      In the same way, as the national court rightly stresses, the judgments given so far by the Court of Justice on the direct effect of agreements made between the Community and nonmember States are not conclusive. Thus this Court recognized various provisions of the 1973 Yaounde Convention as having direct effect since that Convention was not based on reciprocity but was intended to confer special advantages on certain African countries and to Madagascar. On the other hand it is not possible to speak of any such lack of reciprocity with regard to the Agreement between the EEC and Portugal which is based on the principle of strict equality.
      In its judgment of 30 April 1974 in Case 181/73 Haegeman [1974] ECR 449 the Court clearly stated that the Agreement of Association made between the Community and Greece was an integral part of Community law and thus recognized the direct effect of certain provisions of that Agreement. In my Opinion in the Pabst & Richarz case I therefore also regarded Article 53 (1) of the Agreement between the EEC and Greece as having such effect in view both of its aims and its wording, which was comparable to that of the first paragraph of Article 95. However in the present case the aims and content of the free-trade agreement with Portugal are more restricted and further the wording of the first paragraph of Article 21 thereof differs appreciably, as we shall see, from the corresponding provisions of the first paragraph of Article 95 of the Treaty.
      Finally, and contrary to the view of the respondent in the main action, it is not possible to rely on the judgment of 13 March 1979 in Case 91/78 Hansen [1979] ECR 935. Although the provision, namely Article 5 (1) of Decision 70/549 of 29 September 1979, which was interpreted there is almost identical to the first paragraph of Article 21 of the Agreement between the EEC and Portugal, it is an integral part of a unilateral legal measure in which the Community decided to grant certain benefits to associated countries and overseas territories which are listed in it. That decision also lacks the reciprocity which I have mentioned and which alone justifies recognition of direct effect.
      On the other hand the judgment of 12 December 1972 in Joined Cases 21 to 24/72 International Fruit Company [1972] ECR 1219 did not recognize the direct applicability of Article XI of GATT concerning the abolition of quantitative restrictions since the provisions of GATT which are expressly addressed to the States as “Contracting Parties” are distinguished by great flexibility.
      In my opinion the same is true of the Agreement between the EEC and Portugal: its provisions, like those of GATT, are less rigid than those of the EEC Treaty; it contains a number of derogating clauses of wide scope and finally it may be denounced, whereupon the Agreement ceases to be in force 12 months after the date of notification (Article 37). As regards the differences in content, structure and objectives between the EEC Treaty and the Agreement between the EEC and Portugal may I refer to what I said in my Opinion in the Polydor case. It seems to be particularly significant in that respect that the Agreement between the EEC and Portugal, like the other on free-trade agreements, makes no provision for any kind of court to decide disputes but simply refers to the political procedure of the “Joint Committee” (Article 32 et seq.). To recognize a provision of that Agreement as having direct effect without the guarantee that an individual may rely on the provision in Portugal on the same terms and with the same results in relation to legal protection would, by reason of the absence of reciprocity, lead to the Community's being at a disadvantage and that would not correspond to the discernible intention of the Contracting Parties.
      In its judgment of 9 February 1982 in the Polydor case this Court clearly brought out the different objectives of the Agreement between the EEC and Portugal, which aims to liberalize trade between the Community and Portugal, and the EEC Treaty which “seeks to create a single market reproducing as closely as possible the conditions of a domestic market”. On that occasion the Court stressed that a distinction was all the more necessary inasmuch as “the instruments which the Community has at its disposal in order to achieve the uniform application of Community law and the progressive abolition of legislative disparities within the Common Market have no equivalent in the context of the relations between the Community and Portugal”. In consequence the Court held that in spite of the similarity of the terms of Articles 14 (2) and 23 of the Agreement between the EEC and Portugal on the one hand and Articles 30 and 36 of the Treaty on the other there was no sufficient reason to apply the case-law on the EEC Treaty to the Agreement between the EEC and Portugal.
      The situation can be no different as regards the comparison between the first paragraph of Article 21 of the Agreement between the EEC and Portugal and Article 95 of the Treaty. In a consistent line of decisions since its judgment of 16 June 1966 in Case 57/65 Lütticke [1966] ECR 205 the Court of Justice has recognized the direct effect of Article 95 of the Treaty, although according to its wording it is addressed only to the Member States. That judgment expressly stresses that the system of the first paragraph of Article 95 according to which Member States may not impose on the products of other Member States any internal taxation in excess of that imposed on similar domestic products, is intended to ensure the equal treatment of nationals within the Community under national legal systems and constitutes in fiscal matters “the indispensable foundation of the common market”. It is apparent from that statement that in considering the scope of that case-law it is necessary to bear in mind the objectives and action of the Community as defined in Articles 2 and 3 of the Treaty. In particular it takes account of the fact, as has already been stated in the judgment of 15 July 1964 in Case 6/64 Costa v ENEL [1964] ECR 585, “by contrast with ordinary international treaties, the EEC Treaty has created its own legal system which, on the entry into force of the Treaty, became an integral part of the legal systems of the Member States and which their courts are bound to apply”.
      As I have shown, that concept cannot be applied to the Agreement with Portugal which differs in its objectives and essence from the EEC Treaty and seeks solely to create a free-trade area between the Contracting Parties.
      II —
      I thus come to the second question put by the Bundesfinanzhof, namely whether the first paragraph of Article 21 of the Agreement between the EEC and Portugal contains a prohibition of discrimination corresponding to the first paragraph of Article 95 of the Treaty. By reason of the answer in the negative to the first question the second need be considered only in the alternative, but its answer provides a new argument against the direct effect of the first paragraph of Article 21 of the Agreement between the EEC and Portugal.
      
               (1)
            
            
               Since the judgment in the Liitticke case, this Court has consistently held that the first paragraph of Article 95 contains a prohibition of discrimination constituting a clear and unconditional obligation which is not qualified by any condition or subject in its implementation or effects to the taking of any measure either by the institutions of the Community or by the Member States and is consequently capable of producing direct effects on the legal relationships between the Member States and persons within their jurisdiction. Further in the judgment of 4 April 1968 in Case 27/67 Fink-Frucht [1968] ECR 223 the second paragraph of Article 95 was also recognized as having such effect for it “contains a straightforward prohibition against protection which is the necessary complement to the prohibition set out in the first paragraph of the article”. In that respect it was expressly stressed that although the provision involves the evaluation of economic factors, this does not exclude the right and duty of national courts to ensure that the rules of the Treaty are observed. Finally in the judgments of 27 February 1980 in Case 168/78 Commission v French Republic [1980] ECR 347, 169/78 Commission v Italian Republic [1980] ECR 385 and 171/78 Commission v Kingdom of Denmark [1980] ECR 447 concerning the comparable nature of the tax arrangements on spirits, in view of the difficulties regarding the factual criteria of differentiation the question whether the beverages at issue were or not wholly or partly similar products within the meaning of the first paragraph of Article 95 was left unanswered. The Court found that imported beverages competed at least partially with the relevant national products and that it was therefore necessary to recognize that there was an infringement of the second paragraph of Article 95.
               In another series of judgments (in particular those of 17 February 1976 in Case 45/75 Rewe-Zentrale [1976] ECR 181, 22 June 1976 in Case 127/75 Bobie Getränke Vertrieb GmbH [1976] ECR 1079 and 10 October 1978 in Case 148/77 Hansen & Balle [1978] ECR 1787) an infringement of the first paragraph of Article 95 was recognized when the national taxation system allowed national products in certain cases benefits which the imported product could not enjoy.
               That case-law is explained by the aim of Article 95 which, as the Court confirmed in Case 168/78, is to “guarantee the complete neutrality of internal taxation as regards competition between domestic products and imported products”.
            
         
               2.
            
            
               If the first paragraph of Article 21 of the EEC-Portugal Agreement is compared with Article 95 of the EEC Treaty in the light of that case-law it must first of all be observed that the EEC-Portugal Agreement is not intended to establish an area of “complete neutrality with regard to competition” in an integrated economy. In consequence, a provision of that Agreement on discrimination in taxation may not be interpreted as having such an objective even if it is drafted in the same or similar terms as Article 95 of the EEC Treaty. In view of the more restricted purpose of that Agreement, where there is such a nondiscrimination clause, the only important issue is whether the taxation measures actually have a protectionist effect as regards the importation of goods and thus jeopardize the abolition of the obstacles to trade.
               Such an interpretation corresponds to the prohibition of discrimination laid down in Article III (2) of GATT and Article 6 of the Agreement establishing the European Free Trade Association 1959 (Stockholm Convention) which take account of the protectionist effect on the taxation system.
               In considering the question whether there is such a protectionist effect there is a wide margin of discretion which necessarily assumes that account be taken of economic and tax policy. To recognize the first paragraph of Article 21 of the EEC-Portugal Agreement as having direct effect would allow decisions of courts to prejudge decisions by the Joint Committee. The process of a political decision intended by the Contracting Parties would in that case be transferred to the judicial level and different decisions given by national courts would give rise to disequilibrium in the matter of the implementation of the Agreement which would not be compatible with the reciprocal nature of the EEC-Portugal Agreement.
               Even if the view were to be accepted that the first paragraph of Article 21 of the EEC-Portugal Agreement does not adopt the criterion of the protectionist effect of tax measures and that the provision is similar to that of the first paragraph of Article 95 of the EEC Treaty the same reservations would have to be made for, as the case-law on the first paragraph of Article 95 of the EEC Treaty shows, the concept of similarity also involves a wide margin of discretion, which would mean not recognizing the prohibition of discrimination in taxation in the EEC-Portugal Agreement as having direct effect within the meaning of the case-law of this Court.
            
         
               (3)
            
            
               If provisions drafted in the same terms in different international agreements do not necessarily have the same meaning that applies a fortiori to provisions, such as those in the present case, where there are important differences in wording. The first paragraph of Article 95 of the EEC Treaty aims at equality of taxation whereas Article 21 of the Agreement between the EEC and Portugal refers to “any measure or practice of an internal fiscal nature” establishing “discrimination”. The accent placed on the latter point shows in any event that the Contracting Parties intended to attach greater importance than in the case of the first paragraph of Article 95 of the EEC Treaty to the actual economic effect of discrimination instead of adopting as a criterion only the difference in taxation.
               In relation to the EEC Treaty it is further to be observed that in not having a provision equivalent to the second paragraph of Article 95 the Contracting Parties obviously intended the prohibition of discrimination contained in the Agreement between the EEC and Portugal to have a lesser scope. Then the fact that the first paragraph of Article 21 of the Agreement is confined to like goods necessarily is of more importance than in the case of Article 95 where recourse if necessary may be had to the general provision constituted by the second paragraph.
            
         
               (4)
            
            
               Finally the origin, described in detail by the Commission, of the first paragraph of Article 21 of the Agreement between the EEC and Portugal shows that having regard to the more restricted purpose of the Agreement on free trade the Contracting Parties intended to give that provision a more restricted scope than the corresponding prohibition of discrimination contained in the first paragraph of Article 95 of the EEC Treaty.
            
         III —
      In view of those observations it should no longer be necessary to discuss the other questions. Solely for the sake of completeness I shall however make the following observations with regard thereto.
      
               (1)
            
            
               The court making the reference is asking whether in view of the arrangements contained in Protocol No 8 annexed to the Agreement the first paragraph of Article 21 applies to the importation of port wines.
               The answer to that question follows from Article 2 of the Agreement which lays down in a general way the substantive scope of the Agreement. According to that provision the Agreement applies inter alia to the products specified in Protocols Nos 2 and 8, that is agricultural and processed products, “with due regard to the arrangements provided for in those Protocols”. However the prohibition of fiscal discrimination provided for in the first paragraph of Article 21 of the Agreement is not affected by the arrangements on the reduction of duties on import as is specified in Protocols Nos 2 and 8, which means that the products listed in Protocol No 8 must fall under the general provisions of the Agreement. For the rest, the Protocol does not prejudice the scope which should be attributed to the first paragraph of Article 21.
            
         
               (2)
            
            
               The national court then wishes to know whether imported goods must also enjoy, pursuant to Article 95 of the Treaty or the first paragraph of Article 21 of the Agreement between the EEC and Portugal, tax advantages, in other words whether the advantages which the German Branntweinmonopolgesetz theoretically affords to national products must also be granted to similar imported products. In that respect I agree with the Bundesfinanzhof in considering that it is already possible to infer from the wording of Article 95 of the EEC Treaty and from the case-law of the Court (see in particular the judgments in Cases 45/75 Rewe-Zentrale [1976] ECR 181, 147/77 Hansen & Balk [1978] ECR 1787, 26/80 Schneider-Import GmbH & Co. v Hauptzollamt Mainz [1980] ECR 3469 and 153/80 Rumhaus Hansen GmbH & Co. v Hauptzollamt Flensburg [1981] ECR 1165) that only by means of a specific comparison of the taxation is it possible to decide the question whether or not there is tax discrimination within the meaning of the provision. Potential tax advantages for similar national products which national law in theory allows but which do not occur in practice must therefore not be taken into account on the sole basis of that provision.
               That is true in particular of the first paragraph of Article 21 of the Agreement between the EEC and Portugal the scope of which, as I have shown, is limited and seeks only to prevent the grant of protectionist advantages to national products. In consequence, for the purpose of that provision it is necessary simply to verify whether a tax advantage in fact adversely affects the importation of comparable products, which can be found only by considering the actual volume of the national production benefiting from the advantage and the scope of the resulting repercussions from the point of view of competition. However, as we know from the file on the case, the preferential treatment of liqueur wines produced in the Community in relation to port wines, assuming that these products are comparable, resulting from the possibility of making liqueur wines using alcohol enjoying exemption, is purely theoretical, for the national product which has to be compared is in practice subject to the same charge to tax as the imported product, which means there is no discrimination.
            
         
               (3)
            
            
               Finally the last question, namely whether the prohibition of discrimination contained in Article 21 of the Agreement between the EEC and Portugal prevents differentiation on the basis of the composition of the products, must also be answered in the negative. The Bundesfinanzhof asks that question in view of the fact that the German legislature makes a distinction on the one hand between the duty on fortified wines, which include liqueur and port wines, and on the other hand the duty on wines of a relatively high alcoholic strength derived however from natural fermentation.
               However, as was held in the Bobie case [1976] ECR 1079 regarding Article 95 of the EEC Treaty, that provision does not restrict the freedom of Member States to establish the taxation system which they consider the most appropriate for each product. Further, in Schneider-Import [1980] ECR 3469, Rumhaus Hansen [1981] ECR 1165 and Case 140/79 Chemial Farmaceutici [1981] ECR 1 and Case 46/80 VW [1981] ECR 77 it was clearly stated that differentiation in taxation on products which may have the same use and be employed for the same purposes is not in itself discriminatory under Article 95 of the EEC Treaty if the difference in treatment is based on legitimate criteria objectively justified, such as the difference in the nature of the raw material or the production processes employed. That consideration must apply a fortiori in respect of Article 21 of the Agreement between the EEC and Portugal. As the Bundesfinanzhof rightly finds, in view of those criteria the different tax treatment of fortified wines on the one hand and normal wines on the other is unobjectionable.
            
         IV —
      In answer to the questions put to the Court my opinion is that the Court should rule that the first paragraph of Article 21 of the Agreement of 22 July 1972 between the European Economic Community and the Portuguese Republic, the scope of which is less than that of the first paragraph of Article 95 of the EEC Treaty, is not directly applicable in the legal order of the Community and does not confer on individuals a right on which they may rely before national courts.
      (
            1
         )	Translated from the French.