CELEX: 61977CC0125
Language: en
Date: 1978-06-20
Title: Joined opinion of Mr Advocate General Reischl delivered on 20 June 1978. # Koninklijke Scholten-Honig NV and De Verenigde Zetmeelbedrijven "De Bijenkorf" BV v Hoofdproduktschap voor Akkerbouwprodukten. # Reference for a preliminary ruling: College van Beroep voor het Bedrijfsleven - Netherlands. # Isoglucose. # Case 125/77. # Royal Scholten-Honig (Holdings) Limited v Intervention Board for Agricultural Produce ; Tunnel Refineries Limited v Intervention Board for Agricultural Produce. # References for a preliminary ruling: High Court of Justice, Queen's Bench Division, Commercial Court - United Kingdom. # Isoglucose. # Joined cases 103 and 145/77.

OPINION OF MR REISCHL — CASE 125/77
                OPINION OF MR ADVOCATE GENERAL REISCHL
                                DELIVERED ON 20 JUNE 1978 <apnote>1</apnote>
Mr President,                                       and a split-up of the group is apparently
Members of the Court,                               under way. Isoglucose is also manu­
The cases which concern us today are                factured by the Belgian company G. R.
about a product known as "isoglucose"               Amylum N.V., the applicant in one of
which we have already encountered in                the actions for damages (Case 116/77)
Case       101/76        (Koninklijke Scholten-     with which I have to deal in my opinion
Honig N.V. v Council and Commission                 which follows this one. This company
of the European Communities, judgment               also commenced production early on, in
of 5 May 1977 [1977] ECR 797).                      February 1972, and likewise enlarged its
                                                    plant. In addition Royal Scholten-
Isoglucose is a new sweetener in liquid             Honig (Holdings) Limited, a subsidiary
form which originated in the United                 of Koninklijke Scholten-Honig N.V.,
States at the beginning of the seventies,           decided in 1973 to build a plant for
 100 kilograms of which are approxi­                manufacturing       isoglucose         with    an
mately equivalent to 71 kilograms of                annual capacity of 85 000 tonnes and
white sugar. It is manufactured from                commenced      building at Tilbury in
starch which         has    been   obtained  from
                                                    October     1974. Lastly the English
maize or wheat or potatoes.                In the   company Tunnel Refineries has in
Community the relevant raw material is              recent years invested a considerable
principally maize and to a lesser extent            amount of capiul in the manufacture of
other       cereals        and    the    recorded
                                                    isoglucose in connexion with an existing
processing figures vary between 70 %                starch factory. Part of the capacity thus
and 85 % in the case of maize and
                                                    created has apparently been in use since
 15% to 30% in the case of other
                                                    January 1976.
cereals. However from the autumn 1977
                                                    In   the  case   of       the   manufacture     of
onwards — as we were assured — only
maize     was     used     as  the  raw   material  isoglucose two groups of Community
50 % of which had to be imported                    provisions are material and their validity
because Community production falls                  has to be examined in the present
short of requirements. Isoglucose is                proceedings.     One          deals    with   the
used in the industrial production of                granting    of   production          refunds    in
                                                    connexion     with       the    manufacture     of
foodstuffs where it can replace liquid
                                                    starch products, the other with taking
sugar.
                                                    isoglucose out of the organization of
In the Community isoglucose is manu­                the market in sugar and laying down
factured on the one hand by the                     special common provisions for this
Netherlands            company        Koninklijke   product, in particular the imposition of
Scholten-Honig which, after obtaining a             a production levy on its manufacture.
licence in          1972      and building      an
experimental              plant,      commenced     On this point — it was in pan the issue
production in September 1973 and                    in   Case    101/76         —    the    following
increased it in September 1975 after                detailed information is necessary:
enlarging its factory. However in the               Article  11   of Regulation          (EEC)    No
meantime the Scholten group, as we                  2727/75 of the Council of 29 October
heard during the oral procedure, has                1975 (Official Journal 1975, L 281, p.
become insolvent as from 7 March 1978               1) on the common organization of the
1 — Translated from the German
2008
 ---pagebreak---      KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUKTEN
market in cereals provides that                a In connexion with the special organi­
production refund may be granted:                zation of the market in isoglucose some
"(a) for maize and common wheat used             of the principles of the organization of
      in the Community for the manu­             the market in sugar which originally
      facture of starch;                         included isoglucose must first of all be
                                                 recalled, since isoglucose has to be
  (b) for potato starch;
                                                 assigned to tariff headings 17.02 D and
  (c) for maize groats and meal used in           17.05    D    which      are     specifically
      the Community for the manu­                mentioned in Article 1 of Regulation
      facture of glucose by direct               No    3330/74   of  19    December      1974,
      hydrolosis."                               L 359, p.1).
Article 11 (3) provides that the Council,        The organization of the market in sugar
acting by a qualified majority on a              contains rules relating to quotas which
proposal from the Commission, shall              apply unul the end of June 1980. As
adopt rules for the application of this          provided for in these rules each
article   and    fix   the    amount    of   the Member State has a basic quota which
production refund. The Council did so            has to be allotted to the producers. A
by means of Regulation (EEC) No                  sales and price guarantee applies up to
2742/75 of 29 October 1975 (Official             the amount of the basic quota (A
Journal     1975, L 281, p. 57) on               sugar): national intervention agencies
production refunds in the cereals and            buy the sugar at the intervention price,
rice sectors which was amended by                which is usually above the world price.
Council Regulation (EEC) No 1862/76              There is also a maximum quota (B
of 27 July 1976 (Official Journal 1976,          sugar) which has to be fixed every year
L 206, p. 3) which entered into force on         and is expressed as a percentage of the
 1 August 1976. The latter regulation            basic quota. There is also a price
provided for an increase of production           guarantee for it — in the 1976/77 and
levies for the 1976/77 marketing year            1977/78 marketing years the maximum
because the threshold price for maize
                                                 quota amounted to 135 % and it was
had    been   increased.     However    in   the
                                                 reduced   to  127.5%     for   the  1978/79
case of starch products intended for the
                                                 marketing year. However producers are
manufacture of isoglucose — and this is
                                                 required to make a contribution to the
one of the issues in the present cases —
the rates of the refund for the 1975/76          costs of intervention and expon — A
                                                 and B sugar can be exponed with a
marketing     year were maintained and           refund — and the total losses incurred
refunds were no longer granted with
effect from 1 August 1977. This was              by bringing on to the market sugar
                                                 which exceeds consumption are divided
done in such a way that the refund paid
by the competent authorities of the              by the quantities of B sugar produced.
Member     States    to  all  starch  manufac­   However the total contribution may not
turers  was    recovered     to  the extent   to amount    to  more   than    30 %    of   the
which isoglucose was extracted from the          intervention price which represents a
starch. Commission Regulation (EEC)              ceiling for the 1977/78 marketing year
No 2158/76 of 31                 August    1976  of 9.85 units of account per 100
(Official Journal 1976, L 241, p. 21)            kilograms    of    white     sugar.   Sugar
lavs down the rules for the application          produced which exceeds the maximum
of Regulation (EEC) No 2742/75. By               quota (C sugar) may in principle —
virtue of Article 4 of Regulation (EEC)          except when there is a shortage in the
No    2158/76     those    rules  entered   into Community as there was in 1974 and
force on 3 September 1976 and were to             1975 — only be sold on the world
be applied as from I August 1976.                market at world prices.
                                                                                         2009
 ---pagebreak---                              OPINION OF МR REISCHL — CASE 125/77
Isoglucose was taken out of the organi­        consequently cannot be implemented by
zation of the market in sugar because          the national Intervention Board. Several
special provisions were laid down for it       reasons based on Community law were
by Council Regulation (EEC) 1110/77            put forward in support which must be
of 17 May 1977 (Official Journal 1977,         considered later in detail. The plaintiffs
L 134, p.1). Common provisions for             relied in particular on an infringement
isoglucose, which amounted virtually to        of the prohibition of discrimination in
a mini-market organization, were laid          Article 40 and violation of the objectives
down in Council Regulation (EEC) No            of Article 39 of the EEC Treaty and
 1111/77 of 17 May 1977 (Official              also of the principle of proportionality.
Journal 1977, L 134, p.4) which was            In the Netherlands case the defendant
adopted on the same day. It contains           in the main action served on the
provisions on trade with third countries,      plaintiff, the Koninklijke Scholten-
import levies and export refunds. But its      Honig N.V., in December 1976 a
most important provisions, which have          statement of account of the production
special relevance in the present cases,        refunds for processing maize into starch
introduced a        production levy for
                                               during the period from 1 August to 31
isoglucose. In principle the amount of         October      1976.   Since     this   statement
this levy is the same as that applicable to    worked out in accordance with Regu­
B sugar. However for the 1977/78               lation  No     1862/76    and    No    2158/76
marketing year commencing on 1 July
 1977 it is limited to five units of account
                                               showed a debit for the said period in
                                               respect of the processing of starch into
per 100 kilograms of dry matter; and
                                               isoglucose, the plaintiff in the action
this amount shall only apply if the
                                               which it brought before the College van
production levy for B sugar exceeds five
                                               Beroep voor het Bedrijfsleven asked for
units of account for every 100 kilograms
                                               reimbursement        of     the      production
of white sugar for the same period. The        refunds   which     had   been    deducted.   It
Council has in the meantime extended
this limitation to five units of account
                                               takes the view that the provisions of
                                               Community        law     upon      which    the
until the expiry of the rules relating to      statement    of   account    is   founded   are
quotas, that is until 1980. Implementing
                                               invalid because of failure to give a
rules for applying the production levy         statement of reasons and infringement
were laid down in Commission Regu­
                                               of the prohibition of discrimination. It
lation (EEC) No 1468/77 of 30 June
                                               also submits that there has been misuse
 1977 (Official Journal 1977, L 162, p.
                                               of powers and a breach of the principle
7). Under this regulation the same
                                               of legal certainty.
method       of   calculation    applies   to
isoglucose as to sugar beet.                   Having      regard     to    the     arguments
                                               submitted, which each of the defendants
These provisions have caused several
                                               in the main anions opposes, the courts
anions to be brought in the national           before    which    the   matters     had   been
courts.
                                               brought stayed the proceedings and by
Before the High Court of Justice in            orders of 29 July, 12 October and 8
England the plaintiff in the main action       November 1977 referred the following
in Case    103/77 asked for a declaration
                                               questions to the Court of Justice
that the United Kingdom Government             pursuant to Article 177 of the EEC
is not empowered to implement Regu­            Treaty for a preliminary ruling:
lations    Nos    1862/76,    1110/76    and
                                               I. Case 103/77:
 1111/77, because they are invalid; the
plaintiffs in the main anion in Case           "1. Is   Council    Regulation      (EEC) No
 145/77    asked   for  a  declaration   that       1862/76 in so far as it purports to
Regulation      1111/77    is   invalid  and        insert Article 5a in Council Regu-
2010
 ---pagebreak---      KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUKTEN
      lation (EEC) No 2742/75 a valid                    change in the system of production
     regulation?                                         refunds with the aim of helping the
  2. Is Council Regulation (EEC) No                      sugar industry which aim was not
      1111/77 a valid regulation?                        and is notproper to Regulation
                                                         (EEC) No 2727/75 on the common
  3. Is Regulation (EEC) No 1110/77 a                    organization      of   the    market    in
     valid regulation?"                                  cereals?
II. Case 125/77:                                      5. Must Article 4 of Commission Regu­
"1. Must it be held that the reasons on                  lation     (EEC)     No    2158/76     be
     which Article 2 of Council Regu­                    interpreted as meaning that, taking
     lation (EEC) No 1862/76 is based
                                                         account of the provisions of Regu­
     are   not stated      in   accordance with          lation    (EEC)   No     1862/76,   those
     the requirements of Article 190 of                  refunds in respect of the manu­
     the Treaty and if so does it follow                 facture of glucose with a high
                                                         fructose      content     which      were
     that    Article    2    —    Article   5a  of
     Council       Regulation       (EEC)      No        granted in the period from 1 August
     2742/75 — is not binding?                           to 3 September 1976, on which
                                                         latter date the regulation entered
  2. Is the said Article 2 incompatible                  into force, may be recovered on the
     with the principle of non-discrimi­                 basis of the provisions of the said
     nation which is fundamental to the
                                                         regulation and those of Regulation
     Treaty and which is             set out, in
                                                         (EEC) No 1862/76, and if so, must
     particular, in Article           40 of the
                                                         it follow that Regulation (EEC) No
     Treaty and is Article 2 not binding
     for that reason?
                                                         2158/76 is not binding in whole or
                                                         in part, namely in so far as it makes
  3. Does        Regulation        (EEC)       No        provision for the          recovery of
      1862/76 contain an amendment              to       refunds as mentioned above?"
     the system of granting refunds to
     the       starch        industry,       which  III. Case 145/77:
     amendment,         either     of   itself  or
     because     of    the    fact  that   it  was  The question asked was whether Regu­
     suddenly        introduced        into    the  lation (EEC) No 1111/77 of 17 May
     aforementioned system which has                 1977 is invalid on any and if so which
     been applicable           since    1967,    is of the grounds referred to in the
      incompatible with the principle of            plaintiffs points of claim.
     legal certainty fundamental to the             Before I consider these questions permit
     Treaty and if so is that regulation            me also     to   mention  that those   under­
      not binding in whole or in part,              takings and the Belgian company G. R.
      namely in so far as it makes                  Amylum         Ν. V.     have     commenced
     provision for the said amendment?              proceedings for damages           against the
  4. Have       the      Council       and     the  Council and the Commission. In these
     Commission, by adopting Regu­                  proceedings — the cases in question are
      lation (EEC) No 1862/76 and Regu­             Cases 116, 124, 143 and 153/77 — the
      lation      (EEC)          No       2158/76   same rules are at issue, namely those
      respectively, misused their powers            concerned with the lapse of the
     in that, in adopting those regu­               production refund for isoglucose and
      lations,    they      pursued     objectives  the introduction of a production levy on
     other than those inherent in Regu­             isoglucose. I therefore think it would be
      lation (EEC) No 2727/75, particu­             right for me to consider also the
      larly because by those regulations            arguments        put   forward      in   those
     they introduced the aforementioned             proceedings which are relevant to the
                                                                                              2011
 ---pagebreak---                            OPINION OF MR REISCHL — CASE 125/77
question of the validity of the regu­        II — As       far    as the   content    of   the
lations to be dealt with in the cases now    questions      referred   to    the    Court    is
                                             concerned I would like first of all to
before us in the proceedings for a pre­
liminary ruling; I am dealing with these     deal with the lapse of the production
cases in my present opinion.                 refund relating to the manufacture of
                                             isoglucose.
I — I must preface my argumentation
                                             In   this   connexion     consideration     must
with a brief observation on a question
of admissibility raised by the Council in    first of all be given to Regulation No
Case     145/77.   The    Council    doubts   1862/76 which was adopted for the
whether this reference for a preliminary     purpose of amending Regulation No
ruling is admissible, because the court      2742/75,        whereby      the     production
                                             refund for products intended for the
making the reference has simply
reiterated the plaintiff's complaints, that  manufacture of isoglucose was left for
is to say, it has not made any selection     the 1976/77 marketing year at                 the
from them having regard to the               previous year's level, and was                not
                                             therefore increased as it was in the case
arguments put forward by the parties,
and also has not stated clearly which        of other products, and which provided
facts in this case may be assumed to         that as from the 1977/78 marketing
have been established.                       year a refund would no longer be
                                             granted. Furthermore Commission Regu­
Even if in fact the impression might thus
                                             lation   No    2158/76    also   contains   rules
be given that these proceedings closely
resemble proceedings under Article 173       implementing Regulation           No 2742/75
of the EEC Treaty, which because of          and lays down the detailed rules for the
the regulatory nature of the acts of the     recovery by Member States of contri­
                                             butions to the refund in so far as the
Community which have to be reviewed
could not have been instituted by the        manufacture of isoglucose is concerned.
individuals affected, I do not in the final  The orders making the references ask
analysis see any convincing objection. It    whether these two regulations are valid
must certainly be regarded as desirable      and also for an interpretation of Regu­
                                             lation No 2158/76.
that a request for a preliminary ruling
should deal thoroughly with the circum­
stances of the case and the position         1.   As    far    first  of   all   as  validity
reached in the dispute and if possible       concerned there is thus in essence only
give the reasons why the questions are       one matter to consider since — on the
referred to the Court. But there is no       whole — in the case of Regulation No
express provision for this anywhere and      2158/76 no specific reasons have been
the present case is not the first in which   advanced for its invalidity. In the
the form of the order making the             plaintiffs' view Regulation No 2158/76
reference falls short of the ideal. In such  would have no meaning if Article 2 of
circumstances     we    simply   have    to  Regulation No 1862/76 was proved to
proceed on the basis that the problems       be invalid. When examining the validity
raised by the plaintiff appear to be         of Regulation No 1862/76 there are
convincing   to  tne  national  court   and  formal and material aspects to be
that it has subsequently made the            considered.
questions raised its own. The absence of
any analysis of the parties' submissions     (a) The formal validity of the regu­
should not therefore give us cause for       lation is called in question on the
declaring the reference for a preliminary    grounds that the statement of the
ruling in Case 145/77 — and perhaps          reasons upon which it is based is inad­
the reference framed in the same way in      equate, that it makes no reference to the
Case 103/77 — to be inadmissible.            opinion of the European Parliament
2012
 ---pagebreak---      KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN
which is required under Article 43 (2) of             GmbH      B.J. Stolp v Einfuhr- und
the EEC Treaty and that isoglucose                    Vorratsstelle für Getreide und Futtermittel
manufacturers          were       not    properly    [1975] ECR 421, at p. 435 — that in
consulted before its adoption. The                   the case of legislative measures the
following are my detailed observations               requirements for carrying out the duty
on this argument:                                    to give a statement of reasons are less
                                                     stringent if part of an entire system is
(aa)    The plaintiff in the main action,            under consideration. On this point it is
which     led    to   the   reference   in    Case
                                                     important to bear in mind that Regu­
 125/77,      takes     the    view    that     the  lation No 1862/76 is one of a series of
statement of reasons cannot be said to
                                                     regulations. However the objectives of
be adequate even on the basis of the                 that regulation, in so far as they can be
requirements of the judgment of 13                   inferred from basic Regulation No
March       1968    in   Case    5/67   W.    Beus   2727/75 and Regulation No 2742/75,
GmbH & Co. v Hauptzollamt München                    make it immediately clear why there is
[1968] ECR 83, according to which in                 no question of a production refund for
the case of a regulation more cannot be              the manufacture of isoglucose. Fur­
expected than an indication of the                   thermore it must not be forgotten —
general situation and of the general                 and this refers to the argument that the
objectives which it seeks to attain. It              Community has abruptly altered its
cannot also be said in the present case              consistent      refund     policy      —      that
that the objectives are to be inferred               isoglucose is a new product, which only
from the rules relating to the refund,               appeared on the market in appreciable
contained in Regulation No 2742/75,                  quantities in 1976, and that since 1974
since Regulation No 1862/75 does not                 there have been indications of efforts to
refer    to    the    said   regulation    but    is abolish the refunds or at least to reduce
intended to amend it. Furthermore it is              them considerably.
important to note that the refund policy
                                                     With reference to this argument it must
has since 1967 applied indiscriminately              first of all be conceded that the recitals
to all starch manufacturers and that it
                                                     in the preamble to Regulation No
can be inferred neither from the recitals
                                                      1862/76 are not in fact drawn up in
in   the     preamble      to   Regulation     No
2727/75      —     reference   is  made    in  this
                                                     great detail; they actually contain the
                                                     following:
preamble to the particular situation of
the starch      market — nor from Article            "whereas however, given the objectives
 11   thereof     that   a  distinction   can    be  of the production refund system, such
                                                     an   increase   should    not  be    retained    in
made according to the end products.
Having regard to this situation the                  the case of products used in the manu­
reasons for the abrupt change in the                 facture    of     glucose    having      a   high
                                                     fructose content."
refund policy, which occurred when
Regulation No 1862/76 was adopted,                   However on the one hand I am of the
ought to have been given and full parti­
                                                     opinion that what was said in connexion
culars should have been supplied to                  with   the  decision     not  to   increase    the
explain why isoglucose had been made
                                                     refund must naturally apply to its lapse,
an exception and why in this connexion
                                                     that the reasons in the preamble
even the complete abolition of the
                                                     therefore form a logical entity. On the
production levy was deemed to be right.              other    hand    I  take  the   view    that   the
In   answer to this the        Council   and    the  reference to the objectives of the rules
Commission call attention to the fact —              relating to the refund is sufficient if one
 inter alia by referring to the opinion in           follows the arguments in the Advocate
Case 78/74 Deuka, Deutsche Kraftfutter               General's opinion in Case 78/74 and
                                                                                                  2013
 ---pagebreak---                                  OPINION OF MR REISCHL — CASE 125/77
the relevant case-law to date (judgment              market, can be found to be the principal
of 13 March 1968 in Case 5/67 W. Bern                justification for the rules relating to
 GmbH & Co. v Hauptzollamt München                   refunds, it must accordingly follow that
[1968] ECR 83; judgment of 20 June                   refunds for isoglucose, which is not
 1973 in Case 80/72 N.V. Koninklijke                 exposed, or not yet exposed, to a large
Lassiefabrieken       v     Hoofdproduktschap        extent to such competition, were not
voor Akkerbouwprodukten, [1973] ECR                  included in the system established by the
635; judgment of 18 March 1975 in                    rules.
Case 78/74 Deuka, Deutsche Kraftfutter               In these circumstances the exclusion of
GmbH B.J. Stolp v Einfuhr- und                       isoglucose from the rules relating to
 Vorratsstelle für Getreide und Futtermittel         refunds did not in fact call for any
[1975] ECR 421 and judgment of 23                    special justification and the validity of
February 1978 in Case 92/77 An Bord                  Regulation No 1862/76 can therefore
Bainne Co-operative Limited v The                    scarcely be called in question with
Minister for Agriculture,                not     yet reference to the requirements of Article
published). In this connexion both the                190 of the EEC Treaty.
basic Regulation No 2727/75 and Regu­
lation No 2747/75          have a role and it        (bb) Furthermore one of the plaintiffs
must be regarded as immaterial that the              notes the absence in Regulation No
objectives of the rules relating to                   1862/76 of any reference to an opinion
refunds are mainly indicated in Regu­                of the European Parliament to be given
lation  No 2747/75, which had to be                  in accordance with Article 43 (2) of the
amended by Regulation No 1862/76,                    EEC Treaty. It considers that such an
the one relevant in these proceedings.               opinion is necessary because the said
The     preamble        to    Regulation         No  regulation is not to be regarded as a
2727/75 refers to the special market                 rule for the application of Article 11 of
situation for starch, which might make               Regulation No 2727/75 within the
the production refund appear to be                   meaning of that Article. In fact it has
                                                     exceeded the limits of the authorization
appropriate. It can no doubt be inferred
from   this that     refunds     for the    manu­    granted in that article, since Article 11
facture   of isoglucose         have    not   been   mentions production refunds for specific
included in the objectives of the rules,             products quite generally, and does not
since isoglucose, even if it is obtained             provide that the Council may adopt
from starch, being a sweetener in the                different rules according to the use for
                                                     which the starch was intended.
proper sense of that word, does not
form, part of the starch market. The                 It is however scarcely possible to accept
preamble to Regulation No 2742/75 is                 this line of thought either. In the first
even   clearer.   It  states    that   there   is  a place within the framework of optional
special situation on the market in                   rules relating to the levy, as in Regu­
starches and that the starch industry                lation No 2727/75, it seems quite
must     ensure      that     its     prices     are obvious that the Council must be able
competitive with those of substitute                 within the context of the implementing
products.     In    this connexion special           rules which it has to adopt to
reference      is   made       to     competition    differentiate between end products. This
between      maize      starch,     riсе    starch,  cannot — if a too narrow definition of
potato starch and substitute chemical                the concept of "implementing rules" is
products However if the creation of the              to be avoided and in this connexion I
capacity to compete with the products                refer inter alia to the judgment of 30
of the chemical industry, especially the             October 1975 in Case 23/75 Rey Soda v
petrochemical industry, which can buy                 Caisa Conguaglio Zucchero [1975] ECR
raw materials cheaply on the world                    1279 — be regarded as a fundamental
2014
 ---pagebreak---      KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUKTEN
change of policy in the field of refunds      made of a visit by officials to an
on      which    the    other  Community      isoglucose factory. This thereby ensured
institutions had to be consulted. Further­    that some effect at least was given to
more reference can be made to what has        the interests of the parties concerned
already been stated about the meaning         before the new rules relating to the
and purpose of the rules relating to          refund were settled.
refunds. Thus it emerges from the
recitals in the preamble to Regulation        (b) In addition the validity of Regu­
No 2727/75 that the rules relating to         lation No 1862/76 is also challenged
refunds have been laid down with due          upon grounds relating to substantive
                                              law. In this connexion there are three
regard to the special situation which is a
feature of the starch market. That seems      grounds to consider:
to justify completely the exclusion from      — Infringement of the prohibition of
the rules of products further processed,          discrimination,
which are not included in this market.
                                              — Disregard of the principle of legal
Such a formulation of the rules relating          certainty, by reason of the absence
to   the  refund   in other words   accords
                                                  of any transitional rules,
with their objectives and for that reason
must fall within the category of what         — Misuse of powers.
are    to be regarded as rules for the        (aa)   The isoglucose manufacturers feel
application of Article 11 of Regulation       that   compared with starch manufac­
No 2727/75.
                                              turers, who continue to benefit from the
Since no provision has been made for          production refund, they have been
consulting       Parliament     on        the discriminated     against,   and    in this
implementing rules within the meaning         connexion they also have in mind the
of Article 11 of Regulation No 2727/75        effects of the new rules relating to the
and of Article 9 of Regulation No             refund on by-products such as feeding
 1418/76 — these provisions laid the          stuffs and corn oil. They take the view
foundation for the adoption of Regu­          that it is not permissible to draw a
lations No 2742/75 and No 1862/76 —           distinction according to whether there is
the fact that Parliament's opinion was        competition with chemical substitute
not obtained     does  not conduce    to the  products.     They    make     the    further
invalidity of Regulation No 1862/75.          submission that the rules provide for
                                              discrimination within the group of
(cc) Finally the same applies the             products which are exposed to the
argument       that      the   Community      competition of non-chemical products
institutions wrongly failed to consult the    and refer   in this connexion to the fact
glucose manufacturers before adopting         that a production refund continues to
the regulations which are criticized.         be granted for the manufacture of
On this particular point it suffices to       glucose.
point out that the Treaty does not            I should like for the moment to leave
provide for such consultation and that        open the question whether the objection
there is no corresponding legal principle     can be raised against these arguments
—      at all events when         legislative that the producers of isoglucose and
measures are being taken. Furthermore         starch are the same undertakings and
contact was definitely maintained with        that there cannot therefore be said to be
the interested parties. It was stated         discrimination        against       different
during the proceedings, without being         producen,    because   our    considerations
challenged, that since June 1976 there        must    at least  be  based   on   economic
has been an exchange of views with the        units. I will examine this problem in
starch   manufacturers    and mention    was  another connexion, that is to say, the
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 ---pagebreak---                               OPINION OF MR REISCHL — CASE 125/77
question whether attention must not              consequently           the      interchangeability
more appropriately be focused on the             which       is     a      prerequisite      of    the
products and the relations between them          prohibition of discrimination is absent.
in the field of competition.                     Finally        in      this      connexion        the
For the purpose of evaluating the                Community            institutions      have      also
complaint of discrimination it is now            pointed out — this consideration also is
sufficient to refer primarily to the             relevant in the context of the principle
principal objective, which has already           of equality of treatment — that it would
                                                 have to be said that there was discrimi­
been mentioned, of the rules relating to
the refund as expressed for the first time       nation against sugar manufacturers if
in Regulation No 1955/75. According              isoglucose        manufacturen           were      to
to that regulation starch manufacturers          continue to benefit from the production
                                                 refund.
should     be    enabled      to    meet     the
competition      of     chemical      substitute Consequently the rules relating to the
                                                 refund       also      cannot       therefore      be
products. Isoglucose manufacturers are
not in such a situation, the competition         regarded as invalid because they have
of chemical products (cyclamates) only           provided for different treatment of
being for them very much of secondary            isoglucose products.
importance. It may therefore be said             (bb) The applicants, in reliance on the
that the exclusion of isoglucose from            principle       of      legal     certainty,    also
the rules relating to the refund appears         complain that when the production
to be justified having regard to the             refund for isoglucose production was
meaning and purpose of the rules, and            abolished the existing capacities, in
furthermore it has not been shown that           which capiul had been invested before
the terms of its exclusion have been too         the     adoption          of    Regulation       No
narrowly drawn.                                  2727/75, were not taken into account
Furthermore there cannot also be said            and    that   neither transitional        rules  nor
to be any discrimination against starch          compensatory measures were adopted.
manufacturers because isoglucose and             There were grounds for doing so,
starch are not products which compete            namely that there had been production
with   each    other.    In   this   connexion   refunds since 1967, that there had been
                                                 no    announcement           that  the   refund    in
naturally the main products are taken
                                                 respect of the manufacture of products
and not for instance the by-products
which are also obtained in the manufac­          competing with non-chemical products
                                                 might be discontinued and also that no
turing process and consequently benefit          indication       could     have     been    inferred
indirectly from the rules relating to the
                                                 from Regulation No 2727/75 of any
levy.
                                                 change in the refund policy.
Moreover      as    far   as    concerns     the
                                                 However the Community institutions
reference to the fact that rules relating        answer this with good reason by
to the refund continue to apply in their         pointing out that a certain form of
unamended form to glucose manufac­               transitional rules was adopted in that
turers, it is also important to bear in          the refund for the 1976/77 marketing
mind in this connexion that isoglucose           year contined at the old rate. Having
and glucose are not normally in                  regard to current agreements and
competition with each other. In any              commitments to deliver which had been
case it seems to me to be convincing             entered into this could in fan appear to
that    owing      to     the      considerable  be sufficient. There were scarcely any
difference in the sweetening properties          grounds for measures of adjustment or
each product must be assumed to have             compensatory measures going beyond
its separate field of application and that       this.
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 ---pagebreak---      KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN
Indeed if attention is focussed on the                competitive with synthetic substitute
refund rules which originaly applied —               products. As I have already mentioned
according to Article 11 of Regulation                this prerequisite did not apply to
No 120/67 they were not optional — it                 isoglucose. No one could therefore rely
is of primary importance that according              on the optinal rules relating to refunds
to the recitals in the preamble to the               being maintained in force just for a
regulation they were adopted because of              product of that kind.
the special situation on the market in               From the standpoint also of legal
cereal and potato starches and of the                certainty the existence of a defect which
need to keep prices for those products               might make Regulation No 1862/76
competitive with prices for substitute               appear to be invalid can therefore
products. When            these     rules    were    hardly be established.
introduced no-one even thought of
products such as isoglucose which do                 (cc) The complaint of misuse of
not belong to the starch market and                  powers which still has also to be dealt
also   did   not   arrive   on   the    market   in  with in this connexion is founded on the
appreciable quantities until 1976. On                argument that Regulation No 1862/76
the     other      hand      the     Community       was adopted within the framework of
institutions have correctly pointed out              the organization of the markets in
that undertakings which manufacture a                cereals and that this means that the regu­
product that competes with sugar and                 lation could only pursue objectives
were familiar with the market in sugar               which were connected with that market
and starch products had from the very                organization. But in fact — as can be
beginning to be prudent when making                  inferred from Regulation No 1111 /77 —
capital investments. They could not in               it was support measures for the sugar
fact assume that a set of rules laid down            industry         that       were       involved.
mainly for other purposes would remain               Considerations           which      apply       to
unamended in a sector which might                    competition between isoglucose and
create difficulties for the sugar market             sugar must be regarded as having no
and there was even less justification for            relevance    to    rules  laid   down    for   the
this assumption as the refund policy had             implentation       of the    common       organi­
any way undergone substantial change                 zation     of     the    market     in    cereals.
in recent years. A communication of the              Measures benefiting sugar producers
Commission        in   the    Bulletin    of   the   could only have been properly adopted
European       Communities          (Supplement      within   the   framework       of the   common
 17/73, p.      14) had in fact already              organization of the market in sugar.
mentioned      the necessary amendments
                                                     The Community institutions, in my view
and adjustments.
                                                     convincingly, countered these inferences
If   on    the   other     hand     attention     is with the assertion that the main reason
focussed on a later               period when        for adopting Regulation No 1862/76
considerable quantities           of isoglucose      was     that       they     recognized        that
arrived     on   the    market,      it  is  then    subsidizing isoglucose was incompatible
important to note that the rules relating            with the fundamental aims of the rules
to the refund, as can be clearly inferred            relating to the refund. Since such
from Regulation No 665/75, were only                 considerations concern the very essence
optional at that time. Moreover it was               of the rules relating to the refund they
quite clear that for this period the                 in fact fall within the scope of the
refund was intended — this emerges                   common organization of the market in
from the recitals in the preambles to                cereals. However in addition to this the
Regulation No 1955/75 and Regulation                 view also seems to me to be tenable that
No 2742/75 — to make starch products                 when adopting agricultural measures —
                                                                                                  2017
 ---pagebreak---                              OPINION OF МR KEISCHL — CASE 125/77
and implementing rules laid down                No    2158/76    production       refunds    for
pursuant to Anide 11 of Regulation              isoglucose, which were granted during
No 2727/75, which in the final analysis         the period from 1 August to 3
has its origin in Article 43 of the Treaty,     September      1976,     are    also    to    be
are    such     measures   —     it  must   be recovered.
considered lawful to take into account
the effect on sectors other than those         It is in any case dear that there are no
directly considered, and in the present        legal misgivings due to this regulation
cases even the fact that the retention of      having retroactive effect which militate
the production refund in the case of           against the administrative rules of Regu­
isoglucose would have amounted to              lation No 2158/76 being applied in this
discrimination against sugar manufac­          way. In fact there is no genuine retro­
turers.       Finally    the       Community   activity which might have had the effect
institutions could in justification of their   of imposing unexpected burdens upon
assenion also refer to the case-law of         the     parties    concerned.         As     the
the Court and in particular to the             Commission has rightly observed this is
judgment of 21 December 1954 in Case           quite simply due to the fact that the
1/54 Government of the French Republic         level of the refund and consequently the
v High Authority of the European Coal          amount recoverable have already been
and Steel Community (Rec. 1954-55, p.          laid down in Regulation No 1862/76
7). In that case it was held in connexion      which entered into force on 1 August
with the concept "misuse of powers"             1976   and   that   the    direction   to  the
that where a decision pursues more than        Member     States  to the      effect that   the
one aim, even if an unjustified ground is      amounts of the refund, as far as they
included among the valid ones, this            concern isoglucose and exceed the
would not make it invalid for misuse of
                                               permissible limit, are to be recovered
powers,      provided   that   it   does   not can also certainly be inferred from this
abandon attainment of the main aim. It
                                               regulation.     This     is    conclusive      in
is my impression that this is at least the
                                               deciding the matter and as against this
case in these proceedings.
                                               the question how the recovery is to be
(c) All       things   considered      I  can  effected technically in law is of minor
accordingly state that none of the             importance.
arguments put forward during the
proceedings warrants the conclusion            III — I     come     now     to    the   second
that Regulation No 1862/70 and as a            section of my examination which has to
result    Regulation     No 2158/76 are        deal with the validity of Regulations
invalid.                                       Nos 1110/77 and 1111/77. These regu­
                                               lations took isoglucose out of the organi­
2. After that for the purpose of inter­        zation of the market in sugar and
preting Regulation No 2158/76 — part           introduced a production levy on it. In
of the examination of its validity must        this connexion it is important to note
no doubt also be carried out Írom a            that the levy fixed in the first instance
particular angle — the following brief         for a period of one year for isoglucose
observations must be made at the end of
                                               at a lower level than for B sugar —
this first section of my investigations:       namely five units of account per 100
Article    4   of the  regulation    expressly kg —, pursuant to a recently adopted
states that it shall enter into force on 3     decision of the Council, shall apply until
September 1976, but shall apply from I         the expiry of the rules relating to quotas
August 1976 It follows quite clearly           of the organization of the market in
from this that pursuant to Regulation          sugar, that is until 1980.
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 ---pagebreak---      KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN
 1.  In this connexion it is, I feel sure,          Community institutions and the starch
appropriate      first   to     assemble     some   manufacturers at 150 000 tonnes and at
economic facts which could not be                   the end of 1977 by the plaintiffs at
considered at the outset and which are              160 000        tonnes       and    380 000     tonnes
of    importance        in     examining       the  respectively,         by        the      Community
arguments put forward by the plaintiffs             institutions       at    400 000       tonnes.    The
in the main actions against the validity            Community institutions also expect a
of the said regulations.                           further      increase       of   about    700 000    or
Firn   of   all   as   far    as   concerns    the even      1 000 000         tonnes     by    1980,    in
Community sugar market, following                  answer to which the plaintiffs express
several years when sugar was scarce on             the opinion that the expansion of
it and also on the world market, its own           production capacities is already slowing
production, to which are added imports             down because of the lapse of the
at guaranteed prices from African,                 production levy. In fact from the middle
                                                   of 1976 to the middle of 1977 75 000 to
Caribbean        and       Pacific      countries
amounting to about 1.3 million tonnes              88 000 tonnes of isoglucose were
in fulfilment of obligations under the             produced — calculated on the basis of
Lomé     Convention        which     remains    in the dry matter — which corresponds to
force until 1980, has been large in                about 2 to 3 % of the entire production
recent marketing years. The sugar                  of starch. One plaintiff gave as its actual
                                                   sales     112 000       tonnes       for   1977     and
market is confronted with stagnant or
                                                    154 000 tonnes for 1978.
even falling sugar consumption which at
about 9.3 million tonnes per year is in            Isoglucose arrives on the market in
the    region       of    the     basic    quota.  liquid form. This can be seen as a disad­
Consequently the 1976/77 marketing                 vantage because it has to be kept at a
year produced surpluses of 1.7 million             particular temperature and is more
tonnes in spite of small yields per                difficult and expensive to transpon than
hectare attributable to the drought. In            sugar. The advantages enjoyed by
the 1977/78 marketing year, with the               isoglucose were stated to be inter alia
production of white sugar reaching                 that   it   is   rich  in     natural   fructose and
 11.086 million tonnes — not counting C            colourless, that          it   has   a  neutral taste
sugar — and taking account of ACP                  which brings out the flavour of fruits
sugar imported into the Community, a               and has a high degree of solubility and
surplus of 2.6 to 2.7 million tonnes is to         that when it is stored it is not exposed
be expected. In such circumstances and             to the risk of infection from microbes.
in view of the fall in world prices                The price of               isoglucose is clearly
considerable sums of money are needed              dependent upon            the price of sugar but
to finance exports: thus in the 1977/78            appears to be a          few per cent below the
marketing year the cost was first                  price of liquid          sugar; figures of 5 to
calculated    at    240     to   250    units   of
                                                   7 %     or     even    10     to   13 %    have   been
account per tonne and recently at 220              mentioned. In this connexion the disad­
units of account per tonne. The effect             vantages which             have been       mentioned
of the surplus is also that market prices          and the fact that isoglucose is a new
are approximately the same as the                  product        are   relevant.      Furthermore      in
intervention prices or only slightly               this context attention was drawn to the
above them.
                                                   somewhat lower sweetening properties,
As far as isoglucose is concerned the              which are however disputed, and to the
production      capacities,       expressed     in fact that two materials have to be stored
white sugar equivalents, at the end of             simultaneously by the manufacturers,
 1976 have been estimated by one                   the      specific         reasons        being     that
plaintiff at 70 000 tonnes, by the                 isoglucose is regularly mixed with sugar
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 ---pagebreak---                             OPINION OF MR REISCHL — CASE 125/77
and that inter alia the sweetening prop­        Finally mention must also be made in
erties are greater if there is a mixture       this    connexion      of    the    fact    that
than would be arithmetically expected.         according to the statements of the
It is not disputed that isoglucose can         Community institutions isoglucose is
only replace sugar in the industrial field     manufactured in the Community by five
which     accounts    for   about    half   of or six modem undertakings of the most
consumption. To what extent isoglucose         convenient size and in the ben possible
is expected to oust sugar from this field      locations. On the other hand sugar
remained of course a controversial issue.      manufacturing         in      the       1976/77
The isoglucose manufacturers adhere to         marketing year was spread over 100
the view that at the present time there is     undertakings with more than 200
                                               factories. Most of them are near areas
a market for liquid sugar of 700 000
tonnes and that, since the products have       where sugar beet is cultivated, some are
to be mixed, about half of it can be           old and small and their competitive
                                               capacity — depending on the region
taken up by isoglucose. Their view is
                                               and the harvest — varies considerably.
that, last but by no means least, for
reasons of taste isoglucose is only            2.   If I next turn to the examination of
expected to be used in the drinks              the regulations mentioned just now —
industry and also generally in larger          Regulation No 1110/77 which took
concerns and they believe — also               isoglucose out of the organization of
because the use is restricted in part by       the market in sugar has no significance
administrative     provisions      —      that in this connexion on its own — the firn
isoglucose in the longer term will only        question which might be raised is
replace      about      7%       of    sugar   whether      the    production       levy     on
consumption.         The         Community     isoglucose affects the manufacturers
institutions   on the   other  hand   submit   concerned at all. There are grounds for
that the liquid sugar market is not the        doubting whether it does in view of the
only criterion since pan of the sugar          assertion of some of the plaintiffs that
bought by the industry is solid sugar          the lapse of the production levy itself is
which it liquifies itself. They point out      making the manufacture of isoglucose
that the use of liquid sugar is on the         unprofitable and forcing them to stop
increase — in the United Kingdom it            production. If this were the case, if
already      accounts     for     16 %      of isoglucose therefore were no longer
consumption — and that it is certainly         being manufactured because of the lapse
not essential, especially in the drinks        of the production refund, the rules
industry, to mix isoglucose with liquid        relating to the levies would in fact not
sugar. They therefore expect that in the       apply and consequently the questions
long term isoglucose will have a share         relating thereto would be irrelevant.
of up to 30 % of the sugar market. This        Nevertheless     it seems   to   me    that  for
estimate    has   been    confirmed    in    a various reasons there is no justification
measure by a paper produced during the         for breaking off the examination at this
proceedings and indicating that more           point on that ground.
than 2 million tonnes of sugar will be         One such reason is that is has not so far
replaced      in   Western      Europe      by been     clearly    established     that     the
isoglucose are similar — against which         consequence indicated — cessation of
must be set another nudy giving a              production — is bound to flow solely
figure in the order of one million tonnes      from the lapse of the refund. The
and a forecast by a sugar manufacturer         plaintiff Amylum has not adduced any
of an isoglucose market of 1.5 million         evidence to this effen and the plaintiff
tonnes.                                        Tunnel Refineries only mentions a
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 ---pagebreak---      KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN
decline in profils due to the lapse of the       European Coal and Steel Community
production refund. Finally no circum­             (cf. Case 4/54 Associazione Industrie
stances      exist    which      threaten     an  Siderurgiche Associate (I.SA.) v High
immediate cessation of production; if            Authority of the European Coal and Steel
the worst came to the worst this would            Community (Rec. 1954-55, p. 177)).
only be something to be feared in the            The same must naturally apply in the
future, should         long term         market  field covered by the EEC Treaty.
conditions without a refund not allow
                                                 (b) In connexion also with the intro­
isoglucose to be manufactured prof­
                                                 duction of a production levy there is a
itably. If however it cannot thus at the
                                                 further complaint that the isoglucose
present time be said for certain that the        manufacturers      were     not    consulted
rules relating to the levies are not a           beforehand.
matter     of    importance     to   isoglucose
manufacturers then the examination of            On this and also the corresponding
the questions of validity referred to us         complaint concerning Regulation No
cannot be abandoned.                              1862/76 it must be noted that no such
                                                 obligation exists under the Treaty. Furth­
                                                 ermore we know that, on the one hand,
3. When examining the reasons put
                                                 there     were    contacts    between     the
forward to establish the invalidity of
Regulations       No     1110/77      and   No   Community institutions and the branch
 1111/77 I will first of all consider once       of industry affected — there was a
again the formal complaints.                     meeting in the autumn of 1976, the
                                                 minutes of which have been produced,
(a) Thus one of the plaintiffs drew              and      according    to    the    Council's
attention      to   the    opinion      of the   statements      there      was      extensive
European Parliament (Official Journal            correspondence from June 1976 to May
 1977, C 93, p. 14) which shows that              1977      between      the      Community
Parliament thought it advisable to               institutions    and     the     undertakings
extend to isoglucose the treatment               concerned and also a visit by officials of
applicable to sugar. In the view of this         the    Commission      to    an   isoglucose
plaintiff the Community legislature is           factory. On the other hand it is
obliged according to Article 190 of the          important    to   bear   in   mind   in  this
                                                 connexion that the Economic and Social
EEC Treaty to give a statement of the
reasons why it has not acted upon the            Committee which          has the specific
opinion. There is no such statement of           function of taking due account in the
reasons in the present cases.                    legislative process of the interests of the
                                                 business circles involved was in any case
In   my     view   we    cannot    accept   this consulted. (Official Journal 1977, C 77,
argument. The predominant reason for             p. 18).
this  is  not   so  much    the  fact  that  the
                                                 Regulations Nos 1110/77 and 1111/77
Council has not completely disregarded           cannot therefore be said to be vitiated
the opinion of the European Par­
liament;     the   decisive   factor    on   the
                                                 by any formal and procedural defects.
contrary is that, although the duty to           4.   The examination of the substantive
consult is laid down by Article 43 of the
                                                 arguments submitted concerning the
Treaty, it certainly does not follow that
                                                 validity of the two said regulations is
the opinion given must be considered or          more difficult and covers a wider area.
that if it is disregarded specific reasons
for this must be stated. This point was          (a) In this connexion I turn first of all
settled early on by the case-law of the          to the question whether the Council
Court    in   similar  circumstances     in  the could adopt Regulation No 1111/77,
context of the Treaty establishing the           which is expressly based on Articles 42
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 ---pagebreak---                            OPINION OF MR REISCHL — CASE 125/77
and 43 of the Treaty and refers to the        processed product is a material factor.
objectives of Articles 39, as a measure       However since in the case of isoglucose,
relating to agricultural policy or            as we have heard, the costs of the raw
whether it can be said against this that      materials account for 50 % of the entire
isoglucose is not an agricultural product     costs there can indeed be scarcely any
within the meaning of the Treaty.            doubt that within the meaning of the
In this connexion one of the plaintiffs      Treaty isoglucose is an agricultural
relies on the opinion of the European        product of first-stage processing and
Parliament which has already been            that the Community institutions are
mentioned        and    which      describes accordingly empowered to lay down
isoglucose as an industrial product. It
                                             rules in the context of Tide II on Agri­
                                             culture of the Treaty.
also refers to the definition of agri­
cultural products in Article 38 of the       It must be noted in connexion with the
Treaty which only includes products of       view put forward by one plaintiff,
first-stage processing. Isoglucose which     namely that in the case of processed
is produced by second-stage processing       products the procedure prescribed by
does not fall within this definition and     Article 235 of the Treaty ought to have
Annex II to the Treaty provides no help      been adopted, that the Community
either, for a wide interpretation of this    institutions could safely have recourse
Annex cannot turn agricultural products      to Article 43 of the Treaty. In any case
into industrial products.                    the Council's contention that it must be
                                             possible to introduce a charge under
When considering this question it is in
                                             Anide 43 if there is already a charge of
my view important to bear in mind that
                                             this kind on competing products seems
isoglucose falls within tariff headings      to me to be tenable in this connexion.
 17.02    and    17.05 of   the    Common
Customs Tariff. No problems arise on         (b)    It was then also submitted that the
this account in the case of the first tariff revenue from the production levy on
heading       because   from     the    very isoglucose could not be treated as "own
beginning it was set out in Annex II.        resources" within the meaning of
As far as concerns tarif f heading 17.05     Council Council Decision of 21 April
it is true that it was not inserted in the    1970 (Official Journal, English Special
list in Annex II until the adoption of       Edition 1970 (I), p. 224), since neither
Regulation No 7a of the Council of 18        the requisite conditions, of subpara­
December        1959   (Official    Journal, graphs (a) or (b) nor of the last
English Special Edition 1959-1962, p.        paragraph of Article 2 are fulfilled. It
                                             follows that the contribution cannot be
68). However in my view Article 38 is
to be interpreted in such a way that         used for financing sugar exports; the
paragraph (3) thereof as well as Annex       objective which it sought to attain
                                             cannot    therefore be  achieved  and  for
II    to    the   Treaty   are    invariably
considered in the version from time to       that reason alone levying it must be
time in force. Furthermore it has been       regarded as unlawful.
established by the case-law of the Court     This argument also seems to me to be
(judgment of 29 May 1974 in Case             unconvincing. It must, I admit, be
 185/73 Hauptzollamt Bielefeld v Offene      conceded that in the present cases
Handelsgesellschaft in Firma H. C. König     Article 2 (b) of the said Council
(1974] ECR 607) that the number of           decision, which only applies to customs
operations is not the criterion for          duties, and the last paragraph of that
determining the concept "first-stage         article, which makes compliance with
processing" and that the ratio between       the procedure prescribed by Article 201
the cost of the basic product and the        of the Treaty a prerequisite, do not
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 ---pagebreak---      KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUKTEN
apply. However I do not consider that        supplies when sugar is scarce by
one need have any qualms about               stabilizing the market. Furthermore the
invoking Article 2 (a) with reference to     isoglucose regulation, which in fact
the levy on isoglucose. In this article      increases prices, has disregarded the
appears      the     very      wide-ranging  objective of ensuring that supplies reach
expression "within the framework of          consumers at reasonable prices (Article
the organization of the markets in           39 (e)). However it has not been shown
sugar" according to which I imagine          in each case that disregarding these
even a very close actual connexion with      objectives in order to pursue another —
this organization of the market should       the Community institutions as we know
suffice. In this context one point of        refer primarily to the stabilization of the
interest is that isoglucose was included     market — is essential.
originally in the organization of the        It is in my view advisable at the
market in sugar and taken out of it          beginning of the examination of this
because a special set of rules was           complaint to recall that the decided
adopted for it. Furthermore the levy on      cases of the Court have repeatedly
isoglucose, as can be inferred from the      stressed that all the objectives of Article
recitals in the preamble to Regulation       39 cannot be pursued at the same time
No 1111 /77, is specifically designed to     and with equal effect and it is therefore
finance exports of surpluses which come      permissible to give one or other of them
onto the sugar market. Accordingly the       priority (cf. for example judgment of 13
levy on isoglucose should be treated as      March      1968    in   Case  5/67    W.   Bern
"own resources" within the meaning of        GmbH & Co. v Hauptzollamt München
the Council decision, and it is therefore    [1968] ECR 83; judgment of 24
plain that its use for the said purpose      October      1973    in  Case  5/73     Balkan-
certainly does not come up against any       Import-Export        GmbH v Hauptzollamt
legal obstacles     arising   out   of   the Berlin-Packof         [1973]   ECR        1091;
financial system.                            judgment of 2 July 1974 in Case 153/73
                                             Holtz    &    Willemsen    GmbH v       Council
(c) In the third place the argument          and     Commission        of the     European
that the rules relating to the levies on     Communities [1974] ECR 675). The
isoglucose are incompatible with the         Community institutions have a wide
objectives of Article 39 of the Treaty       discretion in this matter. They exercise
must be examined.
                                             it according to the economic circum­
                                             stances. On the other hand the case-law
The plaintiffs' main submission in
                                             of   the   Court     nowhere   indicates    that
support of this argument is that because
the levy leads to the production of          giving preference to one objective
isoglucose    being    stopped,    technical requires evidence that in the interest of
progress within the meaning of Article       that objective it is essential to disregard
39 (a) of the Treaty is impeded, and by      other objectives.
no means the least of the consequences       As far then as the individual objectives
of this  is that  the  effect  both  on  the referred     to by the         plaintiffs are
work force in isoglucose factories and       concerned the following are my obser­
on    that   part   of the      agricultural vations on the alleged disregard of
Community        which      produces     the them.
necessary raw materials for the manu­
facture of isoglucose has not been taken     With    reference to Article 39 (a)        it is
into   consideration.   The   measure   also certainly of importance that it uses the
runs counter to the obiective in Article     expressions "agricultural productivity"
39 (d) of the Treaty since isoglucose        and "rational development of agri­
can help to assure the availability of       cultural     productivity"    and    "rational
                                                                                        2023
 ---pagebreak---                                 OPINION OF MR REISCHL - CASE 125/77
development         of     agricultural       pro­   maize which alone is used the decisive
duction". This provision can scarcely be             factor however is that in spite of
invoked if the effects of a rule on new              considerable expansion the production
methods in the processing industry are               of maize in the Community presents no
at issue.                                           problems at all since it does not yet
To this must be added that it has not so             meet Community demand by a long
far   been    established      that   the    rules  way. In addition Community maize is
                                                    clearly less suitable for the manufacture
relating to the levies for the time being
in force make it impossible to manu­
                                                    of starch and isoglucose than it is for
facture isoglucose. In support of this the           use as fodder. Consequently only less
figures produced so far, on which the               than 100 000 tonnes of the Community
                                                    maize    used   for   the   manufacture       of
Community institutions have registered
some doubts and have not as yet gone                starch — about 1 000 000 tonnes per
                                                    year — are supplied for the manu­
into in sufficient depth, are probably
inadequate. There is the further point
                                                    facture of isoglucose and imported
                                                    maize is mainly used for this.
that the plaintiff in Case 125/77 only
says that because of the levy isoglucose
                                                    The plaintiffs' reference to Article 39
has to a great extent been eliminated
                                                    (d) — the assurance of the availability
from the market and that the plaintiff
                                                    of supplies — cannot in my opinion
Tunnel Refineries nevertheless began to
                                                    stand because, as has been explained to
produce isoglucose in 1978 even if the
                                                    us, the rules relating to quotas of the
scale of production was smaller than
                                                    organization of the market in sugar
originally planned.
                                                    have provided for a sufficiently large
The     plaintiffs'     reference       in    this  safety margin. Furthermore for some
connexion      to    the    situation     of   the  years there has been a surplus in the
workers     in     isoglucose      factories     is Community — which amounted to 2.7
undoubtedly inadmissible. In my view                million tonnes for the marketing year
such considerations have no place in the             1977/78    —     and    this    situation     is
context of Article 39 (a). If they were             expected     to   continue     both     in   the
appropriate reference could on the                  Common       Market    and    on    the    world
other hand also be made to the situation            market for the foreseeable future.
of the workers in the sugar industry
which is plainly much more labour                   Finally the plaintiffs' reference to Article
intensive and represents a threat to                39 (e) — supplies reaching consumers at
isoglucose.                                         reasonable prices — would not seem to
Last but by no means least the                      hold good. In this respect isoglucose
submissions       put     forward       in    this  can indeed achieve nothing for the fores­
                                                    eeable   future   because   in   the    main   it
connexion on the effects on the agri­
cultural community of impeding the                  follows the sugar price. The point to
production of isoglucose also seem to               bear in mind about the sugar price is
me to carry little conviction. It is true           that owing to the existing intervention
that it is technically possible to manu­            system and the present surplus its
facture isoglucose not only from maize              movements are in any case close to the
but also from potatoes and other                    lower Community price limit, namely
                                                    the intervention price. It does not drop
cereals. But the possibility of so using
the two last-mentioned products in the              below that price if an additional
Community         as    the     Council      with   sweetener appears on the market.
reference to processing              costs     has  Conversely the submissions of the
convincingly       shown       by    means      of  Community institutions on the pursuit
figures, is ruled out. With regard to               of   the   objectives   of    Article    39   in
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 ---pagebreak---     KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN
connexion with the production levy on             (d) The question whether the rules
isoglucose seem to me to be convincing.           adopted discriminate against manufac­
                                                  turers of isoglucose, which is the
According to these submissions its main           unanimous view of the applicants, now
purpose is to stabilize the sugar market,         has to be considered.
that is to say, to counteract any increase        Their view is that since isoglucose
of the surpluses. In this connexion it            competes with sugar it should not be
must be borne in mind that there are
                                                  subjected to a higher charge than sugar.
already surpluses on the sugar market             That is however the position since the
and that in view of the obligations               whole of the production of isoglucose is
under    the   ACP-EEC         Convention     of
                                                  charged whereas in the case of sugar a
Lomé and also the rules relating to               levy for financing exports is only
quotas which remain in force until 1980           imposed on B sugar. If this charge is
and have established rights in a definite         expressed      in terms      of the    entire
way, there are scarcely any other                 production of sugar, and at the same
possible ways of reducing the surpluses.          time it is assumed that the B quota is
                                                  not usually exhausted, and if account is
In addition to the main purpose must be           taken of the lower sugar beet price in so
mentioned the concern to ensure sugar             far as B sugar is concerned, that is to
beet growers, for whom the applicable             say, of the fan that part of this charge
organization of the market in sugar has           is passed on to the farmers, then in the
created certain rights, "a fair standard          case of sugar an average charge of one
of living" within the meaning of Article          unit of account or less per 100 kg is
39 (b). The possibility is not to be ruled        arrived at whilst isoglucose has to bear a
out that in fact a further expansion of           charge five times or more greater than
isoglucose and the attendant increase in          this.
the price of sugar exports will cause
                                                  The Community institutions in answer
sugar beet growing to decrease, at any
                                                  to this refer to the fact that, since
rate as far as so-called B sugar is
concerned,     to  which     indeed   a   lower
                                                  isoglucose is put on a market where
                                                  there is a surplus, it is only logical to
minimum sugar beet price applies. A
                                                  treat it in the same way as surplus sugar
changeover        by     these      agricultural
                                                  and therefore to charge it in the same
communities to products of which there
                                                  way as B sugar. They also take the view
is not also now a surplus might however
                                                  that the only object of the production
not be practicable in the medium term,
                                                  levy on isoglucose is to offset the
quite apart from the fact that the culti­
vation   of   maize   —    this  must    be  the
                                                  competitive advantage which isoglucose
                                                  derives from the organization of the
primary consideration — is not possible
                                                  market in sugar and its rules for quotas
everywhere for climatic reasons and that
                                                  to which isoglucose is not subject. The
for technical reasons (rotation of crops)
                                                  price of sugar from which isoglucose
growing       sugar      beet     cannot      be  also   benefits   would   in  fact be  some
completely abandoned.                              15 %    lower were    it not  for the  rules
If all these maters are considered it can         relating    to   quotas.  The    Community
in fact hardly be said that the rules             institutions also take the view that it is
relating to the levies imposed upon               not the charges on the products but the
isoglucose prevent the attainment of the          consequential effects on manufacturers
objectives     of    Article    39,   even     if which have tot be compared. Here it
considerations such as the fact that it is        must be borne in mind that sugar manu­
in  the   interest   of   consumers    for   the  facturers only produce one product and
budget not to have to bear too great a            are entirely dependent upon one basic
burden are disregarded.                           product. On the other hand starch
                                                                                          2025
 ---pagebreak---                              OPINION OF MR REISCHL — CASE 125/77
manufacturers,      who       also     produce   down until 1980, that in a certain sense
isoglucose, have a wide range of                 therefore  acquired   rights   had  to be
products and can have recourse to a              considered. It is therefore quite under­
large number of basic materials. Since           standable that this problem was kept
they are all large undertakings which            back for consideration in connexion
are capiul rather than labour intensive          with the future definitive rules which
and since the proportion of isoglucose           are to apply from 1980 onwards. On the
in the production of starch is only some         other hand because of the growing
3 °/o they are definitely in a position to       influence of isoglucose on the sugar
pay the production levy on isoglucose at         market it was imperative at least to
the prescribed rate. Finally isoglucose          adopt provisional rules. When this was
derives   benefits   from      the    common    done only certain rules relating to levies
provisions applicable to it under Council       were possible, if cutting the B sugar
Regulation (EEC) No 1111/77 and is              quotas for the 1978/79 marketing year
frequently subject to a lower domestic          is disregarded, which obviously could
taxation than sugar. For the purposes of        not be effected for the preceding
considering whether there has been any          marketing year, because at the relevant
unequal treatment compared with sugar           time the sowing of sugar beet had
objective reasons can be found and in           already    taken    place     and   certain
this connexion the objectives of Article        promises had been given that the old
39 must be especially borne in mind.            quotas would be maintained.
It is obviously difficult to settle this        If I now consider the rules relating to
difference of opinion because two               levies on isoglucose from the standpoint
systems have to be compared which               of discrimination some relatively simple
have been developed on quite different          observations may first of all be made on
lines. One only has to think of the             this aspea of the matter.
applicable    restrictions       on      sugar  In my opinion the reference to the mini­
production, the rules relating to quotas,       market organization for isoglucose with
and the obligation to keep stocks as            its import and expon system and the
well as the guarantee to purchase sugar         observation      made     in     connexion
which    do  not   exist   in   the   case   of
                                                therewith that isoglucose derives certain
isoglucose.                                     benefits from these rules which stabilize
On the other hand the difficulties would        the market are therefore irrelevant. In
certainly not be removed            by laying   fan it may well be that they have at
down identical rules for           isoglucose,  present and will for some time to come
especially by introducing rules for             have no actual effects. Isoglucose is in
quotas corresponding to those of the            fan only manufactured on a large scale
organization of the market in sugar.            in the USA and Japan; imports from
The Community institutions had good             these countries are hardly feasible
reason to show that      in this connexion      however owing to the disunce and the
the fixing and allocation of any quotas         existing transpon problems raised by
would create serious problems, as at the        isoglucose In other words there is
relevant time production capacities were        consequently at the moment no world
being built up and on the other hand            market against the fluctuations of which
representative production figures were          the manufacturer of isoglucose in the
virtually non-existent.       If the rules      Community would have to be protected
relating to quotas were to be practical         and this is borne out by the figures
they might have necessitated cuts in the        produced    by  the  Commission,    during
sugar quotas; the arguments against             the oral procedure, for imports and
making such cuts might have been that           exports of isoglucose since January
in  this connexion   rules   have been     laid  1978.
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 ---pagebreak---      KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN
In my view the reference to the fact that            a greater proportion of the production
different domestic rules relating to                 programme (17 or 25 %) than it does of
levies apply to sugar and isoglucose is              the manufacture of starch as a whole.
also not decisive. This is not the case in           However the fan that in underukings
all Member States — for instance not in              having several production lines care is
the United Kingdom. Furthermore it is                taken to ensure that in principle each
not for the Community institutions to                individual product is in the long run
consider such divergences as it were in              manufactured at a profit is even more
passing when they establish a market                 important. Therefore in my view one
organization.                                        can only focus on individual products,
Furthermore it certainly cannot be                   which compete with each other, and
accepted as "logical" to treat isoglucose            merely compare the charges imposed on
as surplus B sugar simply because its                them and their capacity to bear such
appearance on the market helps to                    charges. Moreover this appears to me to
                                                     be in line with the case-law of the Court
increase the sugar surpluses. This
argument in fact amounts to saying the               (judgment of 19 October 1977 in Joined
                                                     Cases      117/76    and     16/77,      (Albert
Community sugar market has so to
speak already been allocated and that                Ruckdeschel & Co. and Hansa-Lagerhaus
comparable new products in principle                  Ströh      &     Co.     v     Hauptzollamt
have no place on that market but are                 Hamburg-St. Annen [1977] 1753) and
for export. There is no doubt that the               only in this way can an unintended
rules relating to quotas cannot have this            direct charge on starch production,
effect. Even if these rules are accepted             which in any case is under considerable
on account of the stabilizing effect they            pressure from chemical competitors, be
have    on    the      market    —       there    is avoided in the present case.
important criticism of this as well —                On    the   other  hand    the   reference     to
they cannot possibly however have the                alleged discrimination against isoglucose
effect of making new developments in                 compared with glucose, which is also a
this sector practically impossible or                sweetener produced by starch manufac­
unduly difficult. According to the basic             turers, to which the rules relating to the
system of the Treaty, which is liberal,              levies do not apply must be regarded as
access   to   the      market    must      on   the  irrelevant. As to this I recall the point
contrary be      guaranteed      on     the   same   which has already been made in
terms   even   if   in   certain  circumstances      connexion with the examination of the
this involves additional sacrifices for the          rules relating to refunds that because of
general public.                                      the    considerable    difference      in    the
Furhermore        I     consider     it    to    be  sweetening     property     there    was      no
inadmissible when making the necessary               competition.
comparison to focus on the position of               When considering the question what are
the manufacturers and to conclude from               the criteria in accordance with which a
it that large starch factories which also            somewhat better balanced set of rules —
manufacture isoglucose could within the              in view of the complexity of the
framework of their overall programme                 relationship more cannot be required —
which allows a certain flexibility cope              can be found for isoglucose and sugar,
with production levies more easily than              one might first consider treating the
labour    intensive      sugar   manufacturers       levy      on    isoglucose        as     simply
many of which are only small. In this                compensation       for    a     15 °/o     price
respect the picture outlined by the                  advantage which        isoglucose derives
Community institutions requires some                 from the organization of the market in
correction    because      in  factories    where    sugar. This appraisal stems from the
isoglucose is manufactured it represents             history of the establishment of the
                                                                                                2027
 ---pagebreak---                              OPINION OF MR REISCHL — CASE 125/77
organization of the market in sugar. At         even C sugar, since there is in fan
that time there were various domestic           therefore     no     restriction    of    their
rules with officially fixed prices and          production. Therefore I do not see how
production       quotas:    their   principal   the disadvantage at which sugar manu­
feature was that owing to the differing         facturers are placed by the rules relating
price patterns in the Member States            to quotas can be quantified at 15 % of
there was no uniform price level. On           the     intervention       price,     as     the
this basis an approximate market equi­         Commission has assumed, and why
librium      could     also    have      been   accordingly in the case of isoglucose
established for the common organi­             there    was     said    to    be   a    similar
zation of the market in sugar and other        competitive advantage, which could as it
products solely by means of a price            were be creamed off. For this reason I
system. However, if this had been done         prefer to centre the examination on a
prices would have had to be at approxi­        comparison of the charges applicable,
mately their low level in France with the      on the one hand, to isoglucose and, on
result that beet growing in regions at a       the other hand, to sugar.
disadvantage would no longer have              In doing so there certainly seems to me
been possible. In order to rule out this       to be no justification for proceeding as
possibility a higher price level — at          the applicants have suggested, that is to
approximately the Italian and German           say, ascertaining the average charge of
prices — was chosen. However, in view          the entire sugar industry by means of
of the existing production capacities,         which — allowing for the lower price of
which allow 14 million tonnes of sugar         sugar beet in the case of B and C sugar
to be produced, such a price-level made        — with the B quotas being completely
restrictions on production necessary, if       used up one then arrives at a charge of
inordinate surpluses were not to arise.        about one unit of account per 100 kg,
The Community institutions argue that,         and what is more, if account is taken of
had it not been for these rules relating       the fan that in the years 1971 to 1976
to quotas, the Community price level           production of B sugar only amounted to
would have been lower, namely by               between 11 and 19 % of the production
about 15 %. Since isoglucose benefits          of A sugar, that is taking as a basis the
from the rules on prices applicable to         anual average production of B sugar, a
sugar without being subjected to any           charge of only one half of a unit of
restrictions on its production it can be       account is arrived at. In my view this
said that the rules relating to quotas         method of calculation fails to appreciate
give isoglucose a competitive advantage        two essential aspens. In the first place
of about 15% of the intervention price         the history of the establishment of the
which corresponds to approximately five        organization of the market in sugar
units of account. Nevertheless I doubt         reveals that A quota sugar is intended in
whether these reasons given for the            principle to support producers in un­
amount of the levy on isoglucose are           favourable regions and that B quota
correct. There can certainly be no doubt       sugar     is    designed      to    encourage
that there is a link between the sugar         production where it is more competitive
price level and the rules relating to          and where if need be C sugar could also
quotas. The price advantages however           be produced. From this angle the idea
also apply to the sugar manufacturers          suggests itself of forming a group of
and    in   their  case   —    and   this   is sugar producers for whom first and
important — the rules relating to quotas       foremost B quota sugar is meant. On
have very different effects; favourably        the other hand it is of importance that
located    modern    factories  can   readily  isoglucose manufacturers have large
produce the full B quota and indeed            modern      factories   which     have    much
2028
 ---pagebreak---      KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWRODUKTEN
 lower labour costs than sugar factories.       emerges. According to that picture it
It is therefore natural to compare them          has to be assumed that sugar manufac­
with corresponding modern sugar manu­           turers bear a charge which is between
facturers who are favourably located             3.81 and 13.52 units of account per 100
 and also work efficiently. They are            kg. However I also consider — and on
unquestionably manufacturen who also            this point I agree with the applicants —
produce C sugar in large quantities and         that it is proper as far as concerns this
for whom therefore the production               calculation to bear in mind that other
restrictions of the rules relating to           purchase prices apply to sugar beet
quotas are in practice of as little             intended for the production of B and C
importance as they are for isoglucose           sugar, namely in the case of B sugar a
manufacturers.                                  minimum price reduced by 30 % and in
The    Commission     also   took   this  as  a the case of C sugar — as there is no
suiting point when it gave us the               minimum Community price for it — a
example of a modern sugar factory               market price which in 1976 apparently
which produces a great deal of C sugar          only amounted to something more than
— in the year 1976/77 87 % of the A             half of the minimum price for sugar
quota. In the case of this undertaking it       beet. There were thereby included in the
calculated     on    the     basis    of    the comparison, not as might be expected
production figures of the 1976/77               elements of the production costs which
marketing year an average charge on             would have been improper but factors
sugar of 11 units of account, by                relating to the market organization
applying the actual production figures          which in the common organization of
                                                the market are fixed and are calculated
for the year 1976/77 which became
known later, a charge of 8.71 units of          to shift a specific portion of the charge
account and for the year 1977/78 a              on to sugar beet farmers, in the case of
charge of 13.80 units of account per 100        B sugar — as the sugar industry itself
kg. However in my view such an                  admits — about 60 %. If one proceeds
example can scarcely be satisfactory,           in    this    way      and   if   appropriate
especially as we were told during the           corrections are made to the figures
hearing that in the factory in question a       produced by the Commission — the
very large amount of C sugar was                applicant Amylum has worked them out
produced, that a large increase of its          by way of example — then one arrives
quota and       of its production was           at charges which are valued at five units
effected, but that it ran at a loss in the      of account for six undertakings, at
 1976/77     marketing      year.    On     the rather less for four undertakings and at
contrary I consider that it is necessary        even more than five units of account for
to place the examination on a broader           four undertakings. However, on that
basis   and   include   all   similar   under­  basis and especially if it is borne in mind
takings    in the investigation. In this        — and      the Commission considers         it is
connexion it is appropriate to confine          appropriate to do so — that frequently
the    investigation     to    the    1977/78   more       than     the    minimum       price,
marketing year, not only because a              sometimes even the A price, was paid
production levy was imposed upon                for B sugar beet, it can be said that the
isoglucose for the first time in this           average charge on such sugar manufac­
marketing year, but also because the            turers on the whole corresponds to the
drought in the preceding              1976/77   charge which isoglucose manufacturers
marketing      year    only     permitted     a also   have   to   bear.  We   should   in    the
relatively small production of C sugar.         main    stick   to   this  method   since     the
The Commission has told us on being             quantification of other factors (the
asked to do so what kind of a picture           advantages accruing to the isoglucose
                                                                                           2029
 ---pagebreak---                             OPINION OF MR REISCHL — CASE 125/77
manufacturer from lower marginal costs         financing of exports of surpluses and
and the existence of by-products —             thereby slow down the growth of
guaranteed purchase of sugar and the           isoglucose. They take the view that an
sugar manufacturers' obligation to keep        appropriate       contribution    to     the
stocks) is unsatisfactory.                    financing of exports of surpluses —
In the final analysis this means that the      quite apart from the fact that the
production levy fixed for isoglucose,         surpluses were to be disposed of in
which from now until the end of 1980 is       another way, namely by reducing the
                                              quotas      —      ought   to   have    been
to be five units of account per 100 kg
does not in fan discriminate against             determined by the market share of
                                               isoglucose, which at the present time is
isoglucose         manufacturers,        and
accordingly it is unnecessary to go           about 3 Vo of sugar consumption. They
further into the question whether             also take the view that, having regard to
placing isoglucose at a disadvantage
                                              the objective of slowing down the
might not even be justified on the
                                              growth of isoglucose, the production
                                              levy must be regarded as excessive,
ground that we are only concerned with
                                              because the Community institutions
transitional rules applicable for a few
                                              have obviously proceeded on the basis
years, that the sugar manufacturers
                                              of misconceptions as to the volume of
might be said to have well established
                                              exports to be anticipated, as to
rights, that there might be a certain
                                              isoglucose's possible market share and
Community         preference    for    sugar
                                              also as to its production costs, if the
extracted from sugar beet produced in
                                              latter were not quite wrongly wholly
the Community as against isoglucose           left   out  of   account.  Furthermore   the
which is manufactured principally from
                                              fan has to be faced that the production
imported products.
                                              levy does not slow down the growth of
(e) Since the complaint of discrimi­          isoglucose but makes discontinuance of
nation,    which     is probably to be        its production unavoidable.
regarded as the principal complaint is        On this issue the following brief obser­
thus unfounded, the question whether          vations have in my view to be made.
objection could be taken to the rules
                                              In so far as the applicants mention
which have been adopted because they
                                              exaggerated       fears concerning sugar
are in breach of the principle of pro­        exports — they themselves give a figure
portionality     must     furthermore     be  of about 500 000 tonnes for the current
considered. As is generally known,
                                              marketing year — it must be borne in
according to this principle which has         mind that they have not succeeded in
been repeatedly applied and explained
                                              questioning the figure of 2.7 million
in the case-law of the Court, an official
                                              tonnes      give     by   the   Community
measure must not have any greater
                                              institutions. It is apparent that the
effect on private interests than is
                                              applicants have simply carried forward
necessary for the attainment of its
                                              the production figures of A and B sugar
objective and it must be established that
                                              of the 1976/77 marketing year to the
it can only with difficulty be replaced by
                                              following marketing year and deducted
less stringent measures.                      from them the presumed consumption.
The applicants take the view that this        However, when they did this — apart
requirement is not satisfied for various      from the fan that it is necessary to
reasons by the rules relating to the          proceed      on     the basis    of higher
levies which have been adopted, the           production values — they overlooked in
purpose of which according to the             particular the quantities in respect of
statements       of     the     Community     which there are obligations to impon
institutions is to fix a contribution to the  under     the  ACP-EEC       Convention    of
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 ---pagebreak---     KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN
Lomé. If the values of the Community          last mentioned point — that the
institutions are taken as a basis and if      forecasts of the Community institutions,
the charge accruing therefrom to the          which I mentioned just now when I
budget is considered it is hardly possible    dealt   with   the   economic    dau, were
to talk of isoglucose manufacturers           pitched     too    high.   On    this point
being required to make an excessive           reference    can  indeed   be  made to the
contribution. In fact they only bear less     fan that the lapse of the production
than 3 % of all export costs: in relation     refund has a slowing down effen and
to the rate of the refund per tonne (220      that in some Member States legal rules
units of account) their share (50 units of    restrict the use of isoglucose. Fur­
account) amounts to less than one             thermore it is of interest to note that on
quarter. If on the other hand only 3 °/o      the American market, an area in which
of the total costs which sugar and            isoglucose has already been produced
isoglucose producers bear were imposed        for a long time, where the production
upon the applicants in accordance with        of sugar is inadequate but a large
their market share, which they consider       amount of maize is produced and where
to be the appropriate method, then the        perhaps reasons of taste and business
other     objective    which     has     been patterns enable isoglucose to be used
mentioned, the slowing down of the            extensively,      the      production    of
growth of isoglucose, would hardly be         isoglucose for the 1976/77 marketing
attained.                                     year is said to have amounted to only
I am unable in addition to accept that        about    1.2   million   tonnes.   However,
the production levy could in fan have         according to the contentions of the
been     avoided    or    reduced     by   an Community institutions the level of the
amendment of the rules relating to            production levy has not been fixed on
quotas applicable to sugar. Such an           the basis of isoglucose's potential share
amendment is ruled out with reference         of the market. Likewise the production
to A quotas because in their case until       costs of isoglucose did not serve as a
the rules which are at present in force       guide-line for determining the levy. On
expire, that is until 1980, there is the      the contrary the main idea for this was
question of the legal situations which        to charge isoglucose and sugar in the
have arisen. In the case of B quota           same way.
sugar a specific reduction was decided        Finally in connexion with the principle
upon for the 1978/79 marketing year.          of proportionality — and with this
However,      in    my    view   there    are observation I conclude my remarks on
significant considerations relating to        this complaint — there can be no
agricultural policy, which I examined         question      of    proceeding     on   the
just now when          I   dealt with     the assumption that the levy was fixed in
objectives of Article 39, which militate      such a way that it renders the manu­
against a reduction by an amount which        facture of isoglucose impossible. On the
would considerably reduce the export          contrary it is my impression that the
levy or even effectively abolish it.          figures which have so far come to light
Furthermore       with    regard     to   the are insufficient to support such an
applicants' argument that when the            assumption. Likewise a charge which
Community institutions fixed the levy         modern sugar factories seem to be able
they     proceeded     on    the   basis   of to bear can also be borne in the same
misconceptions as to the production           way by the less labour intensive manu­
costs of isoglucose and its potential to      facturers of isoglucose. However, in
oust specific quantities of sugar from        principle this viewpoint can least of all
the market within a short time, it may        have any decisive significance when all
indeed turn out — and this refers to the      other considerations point to the charge
                                                                                    2031
 ---pagebreak---                             OPINION OF MR REISCHL — CASE 125/77
being fair. If the position were as the        regard to all the relevant circumstances
applicants consider it to be then it           and especially to the conduct of the
would only be evident that the manu­           Community institutions, there were
facture of this new product, in which it      grounds for being absolutely certain
was     decided    to   invest   when     the that a specific legal situation would not
economic       situation     was     entirely be 'altered.      But   that   is   out    of   the
different, just cannot be carried on          question in these cases as far as the
economically under existing circum­           production levy is concerned. The
stances and in such a way as to maintain      Community institutions were right to
the conditions of competition which           stress that the applicants operate in a
apply to sugar.                               field which is technically very closely
                                              connected with the sugar market and
(f) The applicants also submit that the
                                              that they knew all about this market
Community institutions have wrongly
                                              and the rules governing it, especially
failed to provide for any transitional
                                              those relating to the problem of the
rules and derogations for existing
                                              surplus. They therefore had to take into
capacities and the argument put forward       account     the    fan    that,    in    such    an
in the proceedings relating to the
                                              economic situation, far-reaching stabi­
liability   of public      authorities    for
                                              lization measures would be adopted and
damages that the applicants have been
                                              that the system of financing exports
frustrated      in      their     legitimate  would     also   be   extended     to   substitute
expectations is connected with this.
                                              products as soon as they arrived on the
The applicants point out that isoglucose      market in considerable quantities, and
has    for  some    time   benefited    from
                                              that by no means the least reason for
production refunds, that is to say, from      this was that an amendment of the rules
certain measures to promote it. The           relating to quotas and the import regu­
Community institutions were aware of          lations for the ACP sugar was not to be
the efforts to develop isoglucose in the      expected before 1980.
Community and also knew about the
consequent decisions to invest in it.         For that reason and especially because
Nevertheless they did not at any time         the preparatory work in connexion with
                                              the   measures     has   been   carried    out   in
draw the attention of the applicants to
the fan that in view of a threat to the       such good time that existing contracts
sugar market caused by isoglucose             were scarcely affected by them there
production measures might be adopted.         was no occasion to adopt special
                                              transitional measures which might have
As far as the first part of this argument     frustrated    the   effen    of   the    rules.   If
is concerned it suffices to refer to the
                                              however         isoglucose        manufacturers
fan that it has already become clear in
                                              nevertheless       got     into       unexpected
this case that the production refund was
                                              difficulties that was their own fault,
not intended for isoglucose and that the
                                              because when they made their decisions
latter was not included among the
objectives of the relevant rules. The fact
                                              to invest they did so on the basis of
                                              specific forecasts of the economic trend
that isoglucose manufanurers benefited
                                              — a continuing sugar deficit and rising
for a time from the rules relating to the
                                              prices — which now turn out to be
refund does not establish any legitimate
                                              wrong.
expectation of further encouragement
and preferential treatment.                   (g)   The     other    argument       which     has
For the rest there can only be said to be     now still to be dealt with — it also ori­
a breach of the principle of the              ginates in the proceedings relating to
legitimate expectation that a given legal     the liability of public authorities —
position would continue if, having            namely      that     the    rules     to    which
2032
 ---pagebreak---     KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUKTEN
exception is taken contravene the right     cases can be restricted in the public
to carry on a business freely, which can    interest. On this point it must be borne
be numbered among the principles            in mind in these proceedings that the
which the Community institutions also       applicants operate in a field in which
have to observe, is in a certain way        considerations of agricultural policy are
connected with the principle of pro­        very important and for that reason
portionality which has already been         freedom of manoeuvre is in any case
dealt with. On this point the applicants    very restricted.
once again submit that the production       I therefore assume that the legality of
levy     renders    the   manufacture    of the rules upon which judgment has to
isoglucose impossible, in fact even at the  be passed cannot be seriously called in
level of five units of account per 100 kg   question by relying on the right to carry
which was originally limited to one year    on a business freely.
and now applies until 1980. The capital
invested in isoglucose has therefore        (h) It only remains for me to consider
been lost; the Community institutions       the complaint of a misuse of powers
should in each case have provided for       which the applicants make on the
compensation for this "expropriation".      ground that a set of rules relating to
                                            levies  such    as  those   involved    in   these
On this I can first of all only repeat that
it has not been proved that this            cases may only be adopted under Article
economic consequence is inevitable even
                                            40 of the EEC Treaty in connexion with
if the calculations produced by the
                                            an organization of the market. But there
Community institutions have not so far      is no real organization of the market for
been acknowledged to be conclusive. It
                                            isoglucose, because the advantages to
                                            accrue to isoglucose under Council
also appears to be in principle unlikely
                                            Regulation (EEC) No 1111/77 have not
— and the conduct of the applicant,
                                            as yet been realized. Furthermore the
Tunnel Refineries, supports this view —
that transitional rules could give rise to
                                            rules relating to levies pursue illegal
                                            objectives such as neutralization of the
such a drastic step as the closing down
                                            competition offered by isoglucose and
of a factory.
                                            slowing down its growth, protection of
For     the   rest    the  effect   of  the the sugar industry which is running less
apprehended          discontinuance      of economically and lightening the burden
isoglucose production, if the worst         of the Community budget.
comes to the worst, is the disappearance
of  one branch     of the  starch manufac­
                                            On      this     point    I     have      already
                                            acknowledged         in  another     connexion
turing industry so that the existence of
                                            that   the   advantages     which    isoglucose
the undertaking concerned as such is
                                            was expected to derive from the organi­
not endangered. But such a state of         zation    of  the   market    are   not    at  the
affairs can scarcely be said to be an
                                            moment       of    any     real    significance.
interference in the business amounting
                                            However that naturally does not mean
to expropriation.
                                            that the organization of the market in
By no means the least of the arguments      isoglucose is mere show. The course
of the Community institutions in this       which further development is expected
connexion      is   their   reminder   that to take is entirely in foreign trade
according to the case-law of the Court      although perhaps not so much with
(judgment of 14 May 1974 in Case 4/73       overseas countries as with European
J    Sold, Kohlen- und Baustoffgroß­        countries bordering on the Community.
handlung v Commission of the European       I simply recall that the large French
 Communities [1974] ECR 491) rights         share of isoglucose production has to be
such as those w hich arc asserted in these  exported because of the prohibition of
                                                                                          2033
 ---pagebreak---                            OPINION OF MR REISCHL — CASE 125/77
its use which applies in France. Fur­          products     which     have    considerable
thermore, even if the rules relating to        importance on the market. If however
the levies are perhaps seldom applicable       in this connexion the aim of slowing
in practice, the rules relating to the         down the growth of isoglucose in the
refund, which indeed also apply to            interest of stabilizing the market has
isoglucose in processed products, have        played a pan — the Community
to be borne in mind. I do not therefore       institutions refer specifically to this in
consider that the introduction of a
                                              answers to Parliamentary questions —
production     levy   on     isoglucose    is this would be just as lawful as the other
inadmissible   because   there  is  no  real
                                              subsdiary concern, namely to proteo
organization     of    the     market     in  the Community budget from burdens
isoglucose. Quite apart from that, the        which are too heavy.
imposition of production levies on sub­
stitute products under Article 43 of the      I therefore find that there is no basis for
EEC Treaty can in any case be                 the complaint that there has been a
regarded as lawful, if a corresponding        misuse of powers.
levy within the framework of an organi­
zation of a market — in these cases the       (i) All things considered it therefore
organization of the market in sugar —         emerges that there are no grounds for
is imposed on agricultural processed          legitimate doubts as to the validity of
products.                                     the rules governing the levies on
As for the rest nothing has come to           isoglucose      and      that    there     is
light to show that the real aim of the        consequently no reason to assume that
rules is only the neutralization of the       Council Regulation (EEC) No 1110/77
competition offered by isoglucose and         and Council Regulation (EEC) No
                                               1111/77    are   invalid   and    that  the
the protection of the sugar industry. As
we have been shown the rules aim — in         provisions adopted by the Commission
order to avoid discrimination against         for their implementation, in respect of
sugar — at nothing else but the               which specific arguments have not been
extension of the rules on contributions       submitted during the proceedings, are
applicable to this product to substitute      also invalid.
I therefore submit that the questions referred for a preliminary ruling be
answered as follows:
1. During the proceedings no reasons have become apparent which might
    justify the assumption that Council Regulation (EEC) No 1862/76 in so
    far as it has added an Article 5 (a) to Regulation (EEC) No 2742/75 of
    the Council and Council Regulations (EEC) No 1110/77 and (EEC) No
     1111/77 are invalid.
2. Article 4 of Commission Regulation (EEC) No 2158/76 is to be
    interpreted as meaning that it also applies to the recovery of refunds,
    which have been granted in respect of the production during the period
    from 1 August to 3 September 1976 of glucose having a high fructose
    content.
2034