CELEX: 61981CC0256
Language: en
Date: 1983-03-23
Title: Opinion of Mr Advocate General Mancini delivered on 23 March 1983. # Pauls Agriculture Limited v Council and Commission of the European Communities. # Gritz - Liability. # Case 256/81.

OPINION OF MR ADVOCATE GENERAL MANCINI
      DELIVERED ON23 MARCH 1983 (
            1
         )
      
         Mr President,
      
      
         Members of the Court,
      
      
               1. 
            
            
               The Court has been asked to give a ruling on an application for damages against the Council and the Commission brought by an undertaking which processes cereals and complains that it has not received refunds for the production of maize gritz for approximately three months in 1977. The action is one of a series of cases all of which have the same subject-matter. In that context, this Court has already affirmed the non-contractual liability of the Community and defined certain aspects thereof in several judgments (see, in general, the judgments, of like content, of 4 October 1979 in Case 238/78 Ireks-Arkadyv Council and Commission [1979] ECR 2955; Joined Cases 241, 242 and 245 to 250/78 DGV and Others v Council and Commission [1979] ECR 3017; Joined Cases 261 and 262/78 Interquell Stärke-Chemie v Council and Commission [1979] ECR 3045; Joined Cases 64 and 113/76, 167 and 239/78, 27, 28 and 45/79 Dumortier and Others v Council [1979] ECR 3091; and on the particular points to which I have referred, see, for example, the judgment of 27 January 1982 in Joined Cases 256, 257, 265 and 268/80 and 5/81 Birra Wührer and Others v Council and Commission [1982] ECR 85, concerning the period of limitation; the judgment of 19 May 1982 in Joined Cases 64 and 113, 167 and 239/78, 27, 28 and 45/79 Dumortier and Others v Council, [1982] ECR 1733, on the point in time to be taken for the purpose of quantifying the damage).
               In the present case, it is accepted that, by abolishing, in 1978, the production refunds for gritz provided for under Regulation No 120/67/EEC of the Council of 13 June 1967, the Community was in breach of the principle of equality and therefore committed an unlawful act. Similarly, it is acknowledged that the undertakings adversely affected by that unlawful act are entitled to compensation corresponding to the entire amount of refunds which they had not received. It therefore remains to be established whether there has indeed been damage and, if so, the nature thereof, taking into account two factors: the possibility that producers have of passing on the higher costs to their customers and the particular characteristics of the groats produced by the applicant company. It is also necessary to determine the date to be adopted for the purpose of determining the rate of conversion of the units of account, in which the amount of the refunds is expressed, into pounds sterling, which is the currency in which the payment must be made. Finally, the amount of the default interest and the date from which it is payable must be determined.
            
         
               2. 
            
            
               The facts may be summarized as follows. Pauls Agriculture Limited is a company incorporated under English law and has its registered office in Ipswich, in the United Kingdom. Since the turn of the century, it has produced maize gritz for use in the brewing industry. By letter of 3 July 1981, the company claimed from the Council of the European Communities payment of production refunds in respect of 6857 tonnes of gritz, which were produced in the period from 1 August to 18 October 1977. The sum claimed amounted to 59039 units of account, approximately equivalent to UKL 32874 (cf. the table attached to that letter, which appears in an annex to the application). However, the Council rejected the claim by letter of 17 July 1981, considering that it had been submitted out of time, namely five years after the publication in the Official Journal of the regulation which abolished refunds for gritz. At the same time, the Council noted that the production in respect of which the refunds were claimed had been commenced after the abolition of such refunds, which occurred in March 1975. On that ground, too, therefore, the applicant could not establish any claim.
               Faced with that rejection, the English undertaking brought an action before this Court against the Council and Commission. The application was lodged at the Court Registry on 21 September 1981. The applicant claimed that the Court should
               
                        (a)
                     
                     
                        primarily, declare that the decision of the Council communicated by letter of 17 July 1981 is void and that the Community must pay to the applicant the sum of UKL 32874.65, together with interest;
                     
                  
                        (b)
                     
                     
                        in the alternative, order the Council or the Commission, or both, to pay the applicant the same sum by way of damages, together with interest;
                     
                  
                        (c)
                     
                     
                        in either case, order the defendants to pay the costs.
                     
                  
         
               3. 
            
            
               Through its Counsel the applicant expressly abandoned the first of those claims — which, I repeat, was its primary one — in the course of the oral proceedings. The thema decidendi of the present case may therefore be confined to the alternative claim which is for compensation, for the applicant's losses arising from the failure to pay the refunds.
               In that more limited context, the Council and the Commission acknowledge that Pauls Agriculture Limited, like any other undertaking which produces gritz for use in the brewing industry, has sustained a loss as a result of the provisions contained in Regulation (EEC) No 665/75 of the Council of 4 March 1975. Both institutions, however, contest the English company's claim for compensation on the basis of arguments founded on the particular features of the case. I propose to consider each of those arguments in turn beginning with two objections which were dealt with at somewhat excessive length, even though they were not pursued in depth, in the application and defences.
            
         
               4. 
            
            
               I refer in particular to the argument which is based on the period of limitation for obtaining damages. I would recall in that respect that according to the first sentence of Article 43 of the Protocol on the Statute of the Court of Justice of the European Economic Community, “proceedings against the Community in matters arising from non-contractual liability shall be barred after a period of five years from the occurrence of the event giving rise thereto”.
               That objection was, it is true, raised by the Council in its letter of 17 July 1981, that is to say before the commencement of the proceedings. It is also true, however, that in their respective defences the Council and the Commission conceded that it was unfounded. They acknowledged that the time which elapsed between the date, or rather the dates, in respect of which the refunds should have been paid (August to October 1977) and the commencement of the proceedings (21 September 1981) was less than five years. There can be no doubt that the period of limitation which extinguishes the right to compensation begins to run from the moment when it becomes possible to claim the refund. That proposition was affirmed by this Court in the judgment of 27 February 1982 in Cases 256, 257, 256 and 267/80 and 5/81 Birra Wübrer and Others v Council and Commission.
               
               As I have mentioned, there is a second objection, also raised before the commencement of the proceedings, which should be disposed of immediately. In its letter, the Council asserted that Pauls Agriculture Limited had begun to produce gritz for use in the brewing industiy after the entry into force of the regulation of 4 March 1975. The loss of which it complains, therefore, did not result from the abolition of the refunds by the regulation and in consequence no compensation was payable. Support for that contention is said to be provided by the judgment of the Court of 4 October 1979 in Joined Cases 241, 242 and 245 to 250/78 DGV and Others v Council and Commission, which I have already referred to, in particular paragraph 19 of the decision.
               However, I do not find that argument convincing because, as the parties acknowledge, Pauls Agriculture Limited has produced maize gritz for use in the brewing industiy since the beginning of the century. The fact that its claim for damages refers only to three months in 1977, and therefore to a period which followed the abolition of the refunds, is easily explained. As a result of the transitional measures contained in the Act of Accession, English producers were only entitled to receive refunds for gritz and similar products as from 1 August 1977. In the face of that undeniable fact, the Commission has, moreover, expressly conceded that the objection in question is unfounded (cf. defence of 15 March 1982, p. 3, para. 4).
            
         
               5. 
            
            
               I turn now to the objections of substance raised by the defendants in their written pleadings. The first is founded on the so-called “passing on” to customers of the higher costs with which the undertakings were faced when the Community refunds to which they were entitled were abolished. The Council and the Commission rely primarily on a general principle of liability which cannot be disputed, namely the rule according to which compensation is only payable in respect of losses actually sustained. On the basis of that premise the defendants maintain that, in the present case, the applicant must establish that it did not pass on the losses resulting from the nonpayment of the refunds in the prices charged to its own customers. If such a transfer had in fact taken place, the loss would have been borne by the customers and not by the producer. In other words, only by furnishing documentary evidence that there was no passing on can it be proved that there is actual damage and therefore entitlement to appropriate compensation.
               Let me say at once that I cannot accept that reasoning. Passing on has been linked to the concept of compensatio lucri cum damno; alternatively it may be seen as a duty of fairness which requires the party sustaining loss to mitigate his loss, thereby protecting the author of the unlawful act from more serious consequences. Whichever theory is adopted, only one conclusion is possible. The idea that losses may be passed on and the principles which govern noncontractual liability are as a general rule irreconcilable.
               On the first point I fully agree with the view of Mr Advocate General Capotorti, expressed in his Opinion delivered on 12 September 1979 in Case 238/78, Ireks-Arkady v Commission and Council. According to him the passing on of the loss could cancel out or reduce the damage recoverable only if the principle were applicable “that against the damage must be set off any benefit flowing from the same unlawful act”. The applicability of that principle must be excluded (or at least it was excluded in the Ireks-Arkady case which is on all fours with this one) because “the benefit which is presumed to be connected with the increase in prices could never be said to have been caused by the abolition of the production refunds: it is ... the result of an independent decision of the producers. In other words: the balancing of the damage against the gain presupposes that both are direct and automatic consequences of the unlawful act, whereas ... the abolition of the Community aid did not directly give rise to any benefit for the undertakings sustaining damage” ([1979] ECR 2976 at p. 3005).
               No better results are achieved by “seeking refuge in general clauses”, as J. W. Hedemann would have said. Honesty, fair dealing, solidarity between private and public operators are noble concepts and do not lack a legal aspect even outside the contractual sphere. However, they have scarcely any part to play as regards governing and clarifying the situation in this case. Passing on, in the sense of a duty to spare the perpetrator of the unlawful act more serious consequences, is subject to insurmountable limitations by virtue of the effects of free competition. When undertakings fix prices, they do not, indeed they cannot, take into account only their own costs and the profits which they desire; their behaviour is determined by the conditions on the market. If the market situation enables the price to be set at a certain level without affecting the volume of sales, the undertaking will fix upon that level and not on others, whether it likes it or not and whether or not it has received Community aids.
               And that is not all. Let us assume that the conceptual objections upon which, in my opinion, the passing-on theory founders, may be overcome. Even in that , case I could not share the view, put forward by the Council and the Commission, that the negative burden of proving that the loss has not been passed on in prices falls on the person sustaining the losses in support of that view the defendant institutions rely on the case-law of the Court, albeit in general terms. That reliance is misplaced. Among the many judgments in which the Court has considered the question of the passing on of losses there is not one which deals directly or indirectly with the problem of the onus of proof. On the other hand there are arguments of considerable force which may be ranged against that proposition. The first of these is the well known and universal rule which governs the sharing of the burden. I would express it in these terms : he who asserts a claim must prove the matters which he asserts; he who contests the claim must establish the facts which disprove it in whole or in part.
               In the present case, passing on clearly constitutes a ground which extinguishes the obligation to pay compensation. It is a supervening factor in relation to the unlawful act which gave rise to the obligation and has the effect of cancelling out that act or limiting its scope. In those circumstances, the burden of proving that factor cannot be said to rest on Pauls Agriculture Limited. All that the latter is required to establish, in addition to the unlawful conduct of the adverse party and the causal connection between that conduct and the loss, is that it has sustained an economic loss. More specifically, it is sufficient that the undertaking establishes that it has, in a given period, produced a certain quantity of gritz intended for use in the brewing industry. The Community, on the other hand, if it wishes to be discharged from the obligation to pay compensation, must prove that it has paid the refunds or, should the device of passing on be regarded as valid, furnish documentary evidence that the higher costs have been passed on.
               In the course of the oral proceedings, in any case, the representatives of the defendant institutions, whilst reaffirming in principle that the onus of proving the passing on of the loss rests on the parties who have sustained it, acknowledged that in fact there had been no passing on in this case. At least on that point, therefore, the argument in defence which I have discussed seems to be unfounded.
            
         
               6. 
            
            
               But the defendant institutions rely on a second argument based on the interpretation of Regulation (EEC) No 2727/75 of the Council of 29 October 1575 (Official Journal 1975, L 281, p. 1) and Commission Regulation (EEC) No 1570/78 of 4 July 1978 (Official Journal 1978, L 185, p. 22). The first concerns the common organization of the market in cereals; the second lays down detailed rules for the implementation of Regulation (EEC) No 2742/75 which relates to production refunds for starch products.
               Article 1 of Regulation No 157/78 indicates the characteristics which groats and meal must have in order to qualify for refunds. Among those characteristics is specified the minimum size. But according to the defendants, this is not enough. In their defences, they observe that according to the supplementary note to heading 11.02 or the Common Customs Tariff, “the expression ‘cereal groats and cereal meal’ means products obtained by fragmentation of cereals grains, of which: (a) in the case of maize products, at least 95 % by weight passes through a silk gauze or manmade textile sieve with an aperture of 2 mm”. In brief, in addition to being larger than a minimum size, the cereal groats and cereal must not exceed a certain maximum size; and that, or rather the fact that the gritz produced by the applicant between 1 August and 18 October 1977 did not exceed that limit, must, it is said, be proved by the applicant.
               That argument is wholly without merit. The defendants themselves, moreover, acknowledged as much when they admitted in the course of the oral proceedings that granules of gritz of more than 2 mm in size are used in the United Kingdom for the manufacture of beer and that the failure to grant refunds for that type of product constituted no less of a breach of the principle of equality of treatment than the failure to pay refunds in respect of granules of gritz of a smaller size. Both types of gritz represent a substitute for maize starch used in the brewing industry and therefore there can be no justification for granting refunds in respect of the smaller granules and not of the larger ones. By their admission, in other words, the defendants have merely adhered to the principles affirmed by this Court on 19 October 1977 in the judgments in Joined Cases 117/76 and 16/77 Ruckdeschel v Hauptzollamt Hamburg-St. Annen [1977] ECR 1753 and 124/76 and 20/77 Moulins Pont-à-Mousson v Office. Interprofessionnel des Céréales [1977] ECR 1795.
               Under those circumstances, I can see no point in establishing whether or not Council Regulation (EEC) No 1127 of 30 May 1978 (supplemented by the implementing regulation of 4 July 1978, No 1570, which restored the refunds for maize gritz as from 19 October 1977, and thus from the date of the judgments to which I have referred) applies to maize groats and meal more than 2 mm in size. The implications of that legislation only became evident after the period (August -to October 1977) to which this case refers. I therefore refrain from considering the arguments developed in the course of the oral procedure by the Council and the Commission on the interpretation of Regulation No 1570/78 and on the power to adopt measures to make it clear in express terms that the refunds (which were restored in 1978) apply to granules of gritz exceeding the maximum size as well.
            
         
               7. 
            
            
               I now turn to the date to which reference must be made for the purpose of determining the rate of conversion from units of account to pounds sterling. It is well known that refunds are currently expressed in European units of account; on the other hand, as the applicant is based in the United Kingdom, the payments — and therefore the compensation for damage as well — are to be made in the national currency.
               In the course of the oral procedure, counsel for Rauls Agriculture Limited claimed that the loss should be calculated on the basis of the rate in force at the time of the judgment, and, in particular, that the default interest should be calculated as from the same date. In their defences, on the other hand, the defendants maintain that the relevant date was that, on which the economic loss occurred, more specifically that of the commercial operations in respect of which the refunds were payable. However, once again, the defendants changed their approach during the hearing and acknowledged that it was appropriate to apply the rate prevailing at the date of the judgment in which the liability of the Community was ascertained. This, moreover, is in conformity with the line adopted in the decisions of the Court. In its judgment of 19 May 1982 in Dumortier and Others v Council, to which I have already referred, the Court stated that the refunds constitute only the basis for calculating the sum payable by way of compenstation and that the loss is calculated by reference to the situation which existed at the time when liability was determined. Starting from that premise, the Court then held that the amount of the loss must be fixed by applying to the refunds the rate of conversion of the day on which judgment on the question of liability was given (see in particular, paragraphs 10, 11 und 12 of the decision).
               There is no reason for not following the approach adopted in that judgment in this case too, especially in view of the fact that, as I have said, the parties eventually reached agreement on the point.
            
         
               8. 
            
            
               I now turn to the question of the default interest. In its reply of 25 May 1982, the applicant maintains that the defendant institutions should be ordered to pay it the interest on the sum awarded as damages as from the time when it should have received the refunds. Pauls Agriculture Limited adds that such interest should be paid at the commercial rates normally applied in the place where it carried out its activities during the months in which the refunds were not paid.
               We are therefore presented with two distinct problems. The first concerns the date from which the interest runs and the second the amount of the interest. To support the proposition that it should be calculated by reference to the time when the loss occurred, counsel for the applicant essentially develops two arguments. First of all he claims that a similar solution has been adopted in the legal systems of the Member States. That, however, is not correct. The legal systems of the Member States do not recognize any general principle according to which default interest must be calculated from the date of the loss. On the contrary they adopt a great variety of rules. As Mr Advocate General Capotorti noted in his opinion of 27 April 1982 in Dumortier and Others v Council (which I have already mentioned), in some cases “the award of interest and the date from which it is to commence is in the discretion of the court ..., in others interest runs from the date on which payment is demanded of the debtor ... or from the date of judgment” ([1982] ECR 1752, in particular p. 1756).
               The applicant then maintains that the sole means capable of guaranteeing an effective restitutio in integrum of the person sustaining the loss is to recognize -that default interest begins to run from the date on which the loss occurred. But that argument, too, I find unconvincing. In the judgment in Dumortier this Court stated that full restitution may be achieved by fixing the damages as at the date on which liability was determined and accordingly held that default interest runs from that date. Moreover, if it is accepted that the compensation for a loss represents the restoration of the assets of the injured party with reference to the date as at which the Court fixes the damages, it is reasonable to adopt the theory according to which interest runs from the same date. The case-law of the Court supports that conclusion. Again I refer to the judgment in Dumortier of 19 May 1982.
               Finally, there is the question of the amount of default interest. In the applicant's view such interest should correspond to that which is customary in commercial practice. The institutions on the other hand are of the opinion that the rate should be fixed and, in conformity with the case-law of the Court, should be 6% per annum. I think that the second view is to be preferred, on the one hand, because it is necessary to take into account the principle of equality, and on the other because it has in its favour a clearly defined approach in the decisions of the Court. It seems to me undeniable that to allow as many different rates (which are moreover variable in time) as there are Member States, on the basis of the geographical situation of the creditors, creates a risk of discriminatory treatment. I assume that the Court adopted the theory of a single rate fixed at 6% precisely to avoid that risk (cf. judgment of 4 October 1979 in Joined Cases 261 and 262/78 Interquell Stärke-Chemie v Council and
                  Commission to which I have already referred, paragraphs 22 and 23 of the decision, and the judgment of 19 May 1982 in Dumortier and Others, already cited) moreover, has not revealed any grounds which might justify a departure from that case-law.
            
         
               9. 
            
            
               In view of all the foregoing considerations, I propose that the Court give an interlocutory judgment on the application which was submitted on 21 September 1981 by Pauls Agriculture Limited against the Commission and the Council and that it should:
               
                        (a)
                     
                     
                        Declare that the European Economic Community is liable for the losses sustained by the applicant as a result of a breach of the principle of the equality and more specifically as a result of the disparity of treatment in relation to the producers of maize starch brought about by the abolition of production refunds on gritz, which was held to be unlawful in the judgments of the Court of 19 October 1977 in Joined Cases 117/76 and , 16/77 and in Joined Cases 124/76 and 20/77;
                     
                  
                        (b)
                     
                     
                        Accordingly declare that the European Economic Community must pay to the applicant damages in a sum corresponding to the amount of the refunds which were not paid during the period from 1 August to 18 October 1977 for maize used in the production of groats and meal (gritz) intended for use in the brewing industry, such damages to be calculated on the basis of the units of account per tonne paid in the same period as refunds in respect of the production of maize used in the manufacture of starch;
                     
                  
                        (c)
                     
                     
                        To fix the sums payable by applying to the units of account (now ECU) the conversion rate for pounds sterling applicable at the date of the judgment;
                     
                  
                        (d)
                     
                     
                        Increase the said sums by default interest at the rate of 6% as from the date of the judgment;
                     
                  
                        (e)
                     
                     
                        Allow the parties a period of three months within which to reach agreement on the amount of compensation and to inform the Court thereof;
                     
                  
                        (f)
                     
                     
                        Order the European Economic Community to pay the costs on the basis that they have failed in their submissions.
                     
                  
         (
            1
         )	Translated from the Italian.