CELEX: 61978CC0091
Language: en
Date: 1979-01-16
Title: Opinion of Mr Advocate General Capotorti delivered on 16 January 1979. # Hansen GmbH & Co. v Hauptzollamt Flensburg. # Reference for a preliminary ruling: Finanzgericht Hamburg - Germany. # Taxation of spirits. # Case 91/78.

OPINION OF MR ADVOCATE GENERAL CAPOTORTI
      DELIVERED ON 16 JANUARY 1979 (
            1
         )
      
         Mr President,
      
         Members of the Court,
      
               1. 
            
            
               The problems to be settled in the present action once again arise from the German monopoly in spirits. It should be recalled first of all that, following the judgments delivered by the Court of Justice on 17 February 1976 in Cases 45/75 (Rewe) and 91/75 (Miritz), the Federal Republic, by a Law of 2 May 1976, amended the rules concerning spirits and inter alia liberalized imports, abolishing the monopoly's exclusive right in that field. This produced an immediate increase in imports and a perceptible fall in the selling prices of spirits on the German market. In fact the State monopoly, which was now encountering competition from products freely imported, was obliged to reduce its own selling prices from DM 333 per hectolitre of wine-spirit to DM 183 as from 23 February 1977 and to DM 115 as from 15 June 1977. However, the high purchase prices at which the monopoly purchased spirits were maintained unaltered; this would have led to a serious deficit for the monopoly if the said Law of 2 May 1976 had not made provision for an increase in the tax on the consumption of spirits, increasing it from DM 1500 to DM 1650 per hectolitre. However, consumers of grainspirits not marketed directly by the producer and those of the monopoly's spirits not marketed directly by the producer and those of the monopoly's spirits were exempted from that increase. By the Law of 5 July 1976 the tax on consumption was increased again and fixed at DM 1950 per hectolitre as from 1 January 1977.
               It should be borne in mind that the tax on consumption takes three different forms, namely:
               
                        (a)
                     
                     
                        that of a tax on spirits properly socalled [Branntweinsteuer] which applies to domestically-produced spirits marketed by the Federal monopoly;
                     
                  
                        (b)
                     
                     
                        that of a spirits surcharge [Branntweinaufschlag] which is imposed on those domestically-produced spirits which are exempt from the obligation to deliver to the Federal monopoly and also on those spirits which, in breach of that obligation, are not so delivered;
                     
                  
                        (c)
                     
                     
                        that of a monopoly equalization duty [Monopolausgleichsteuer] which is levied on imported spirits.
                     
                  Under the said German rules the level of the monopoly equalization duty is equal to that of the tax on spirits and the surcharge on spirits which are not delivered to the monopoly or are exempt from that obligation. However, with regard to domestically-produced spirits, the level of the surcharge is not always the same. In fact provision is made for a reduction, varying in accordance with the raw materials used, of between a minimum of 21 % and a maximum of 30.5 % for spirits produced in Germany by distilleries for which production is estimated at a standard level for tax purposes or by ‘bonded’ distilleries having an annual production not exceeding 4 hectolitres of wine-spirit or by the distilleries of co-operative fruit farms, or, finally (and within certain limits), by owners of the raw materials used. On the other hand, imported spirits qualify for the reduction in the monopoly equalization duty only where they are manufactured from fruit in a distillery with an annual production not exceeding 4 hectolitres of wine-spirit.
               Having established the foregoing let us turn to the case in hand. The plaintiff in the action before the Finanzgericht Hamburg is the undertaking Hansen of Flensburg, which both distills spirits and imports them from other Member States and from third countries. The German customs administration requested the undertaking to pay the monopoly equalization duty on certain quantities of spirits imported by it and put into free circulation in the Federal Republic but Hansen disputed the assessment of the tax made by the Hauptzollamt Flensburg, maintaining that the fiscal arrangements laid down in the Law of 2 May 1976 are incompatible with Articles 37 and 95 of the EEC Treaty. That incompatibility is said to arise from the fact that the tax on consumption imposed on imported spirits is higher than that applying to a portion of the spirits produced in the Federal Republic of Germany as a result of the abovementioned reduction in the spirits surcharge.
               Hansen argued before the Finanzgericht that the sole purpose of the imposition of the tax on consumption was to finance activities for the specific advantage of the domestic products in question: this constitutes an infringement of the prohibition on charges having an effect equivalent to a customs duty. Hansen finally maintained that there was an infringement of Article 93 (3) of the EEC Treaty in the enactment of the Law of 2 May 1976 in that the Federal Republic was late in notifying the Commission of the increase in the tax on spirits.
               In the context of that dispute the Finanzgericht Hamburg, by an order of 22 March 1978, submitted the following preliminary questions to the Court pursuant to Article 177 of the EEC Treaty:
               
                        ‘1.
                     
                     
                        Is Article 37 of the EEC Treaty a lex specialis in relation to Articles 92 and 93 of the EEC Treaty in the sense that State measures which affect the movement of goods between Member States and, where applicable, between Member States and third countries must be judged in the light of Article 37 of the EEC Treaty even if the State measures contain inter alia an aid?
                     
                  
                        2.
                     
                     
                        If Question 1 is answered in the affirmative:
                        
                                 (a)
                              
                              
                                 Is Article 37 (2) in conjunction with the first subparagraph of Article 37 (1) of the EEC Treaty on the prohibition of discrimination between nationals of Member States regarding the conditions under which goods are procured and marketed to be interpreted as also covering State measures which entail an identical increase in the tax on consumption on imported and domestic goods, the income from which is credited to the general budget and is indirectly intended to compensate for the losses of a Sute monopoly of a commercial character which are incurred because certain producers are paid an excessive price which does not accord with market conditions within the Community and because at the same time the selling prices for the products purchased at the excessive prices have been reduced?
                              
                           
                                 (b)
                              
                              
                                 Is Article 37 (2) of the EEC Treaty prohibiting the introduction of measures which restrict the scope of the articles dealing with the abolition of customs duties to be interpreted as also including measures of the kind referred to in Question 2 (a)?
                              
                           
                                 (c)
                              
                              
                                 Does Article 37 of the EEC Treaty also confer direct rights which must be protected by the national courts upon those who are subject to an increase in the tax on consumption which affects imported and domestic goods equally if, although viewed in isolation the increase in the tax is compatible with the EEC Treaty, in conjunction with other measures it is incompatible with the Treaty?
                              
                           
                                 (d)
                              
                              
                                 Does the sphere of application of Article 37 of the EEC Treaty extend to measures which affect the importation of goods from third countries, and if so, subject to what conditions?
                              
                           
                  
                        3.
                     
                     
                        If the imposition of the tax on consumption is a charge having an effect equivalent to a customs duty and if the sphere of application of Article 37 of the EEC Treaty does not extend to imports from third countries: does Article 2 (1) of the Decision of the Council of 29 September 1970 on the Association of the Overseas Countries and Territories with the European Economic Community (Official Journal, English Special Edition), Second Series I, External Relations (2), p. 164) create direct rights which must be protected by the national courts?’
                     
                  The Finanzgericht's doubts as to whether the present German legislation on spirits is in accordance with the EEC Treaty derive both from the above-mentioned treatment in matters of taxation, which is more advantageous to certain domestic spirits than to imported spirits, and from a more general ground relating to the actual operation of the German monopoly in spirits. According to the Finanzgericht that monopoly has not yet been adjusted in such a way as to display solely the characteristics of a national organization of the market. It is said to produce a negative affect on trade and competition as a result of the combined influence of the following factors: the obligation to sell certain spirits to the monopoly and the right to sell other spirits, at purchase prices guaranteed to the producer in both cases; the fixing of selling prices to the public at less than cost price. These result in artificial support for the competitiveness of domestic products in comparison with those of the Member States, whilst it is reasonable to suppose that, were it not for the monopoly, part of the national production would be driven from the market.
            
         
               2. 
            
            
               With regard to Question 1 I have to observe that its wording is such as to give rise to doubts: this is all the more unfortunate in that the whole group of points making up Question 2 is conditional on an affirmative answer to Question 1. In fact, when the Finanzgericht asks whether Article 37 of the EEC Treaty is a lex specialis in relation to Articles 92 and 93 it seems to be advancing the view that the implementation of Article 37 takes precedence over compliance with the provisions of Articles 92 and 93 and may perhaps constitute an exception to them. However, when the Finanzgericht explains that it is referring to ‘State measures which affect the movement of goods between Member States and, where applicable, between Member States and third countries’ which may contain inter alia an aid and asks whether such measures must also be judged in the light of Article 37 the problem takes on a different aspect: (
                     2
                  ) it is in fact assumed that measures of the sort described fall within the scope of Articles 92 and 93 and the doubt expressed is merely as to whether, in connexion with those articles, regard must also be had for Article 37 where the aids are related to a State monopoly of a commercial character. In sum it may confidently be taken the point raised by the Finanzgericht is the relationship between Article 37, on the one hand, and Articles 92 and 93, on the other: it is my view that this point should be treated generally and that thereafter consideration should be given to the various heads which constitute the second question.
               I wish to emphasize at the outset that Article 37 certainly cannot be interpreted as if it were intended to derogate from the provisions concerning aids granted by States. The general structure of Article 37 is in accordance with a number of the fundamental principles of the EEC Treaty: prohibition on discrimination between nationals of Member States regarding the conditions under which goods are procured and marketed and abolition of customs duties and quantitative restrictions. Any derogation from another fundamental principle (protection of freedom of competition, and the consequent restrictions on aids granted by States) would have required an express provision, which in fact was not included. Accordingly, even if the States make use of commercial monopolies in order to provide aids for specified undertakings, they remain fully subject to the provisions of Articles 92 and 93.
               Having established the foregoing it must nevertheless be borne in mind that where State aids are granted by means of a monopoly in order to promote the marketing of agricultural products regard must be had for Article 42 of the Treaty whereby ‘the provisions of the chapter relating to rules on competition shall apply to production of and trade in agricultural products only to the extent determined by the Council …’. In Article 4 of Regulation No 26 of 4 April 1962 the Council provided that ‘the provisions of Article 93 (1) and of the first sentence of Article 93 (3) of the Treaty shall apply to aids granted for production of or trade in the products listed in Annex II to the Treaty’.
               Article 92 is nowhere mentioned in the regulations. As the Court is aware Article 93 (1) requires the Commission, in cooperation with Member States, to keep under constant review all systems of aid existing in those States and empowers the Commission to propose to the latter ‘any appropriate measures required by the progressive development or by the functioning of the common market’. The first sentence of paragraph (3) requires that the Commission be informed in good time of any plans to grant or alter aid, but merely confers upon the Community institution the right to submit its observations thereon.
               Must it be inferred from this that in agricultural matters the limitations of substance on the power of the States to grant aids laid down in Article 92 and the concomitant attribution to the Commission of powers of decision in this sphere under Article 93 (2) no longer have effect?
               This was the view taken by the Commission in the reply which it gave on 9 December 1976 to Parliamentary Question No 543/76 on the adjustment of the monopoly in question (Official Journal C 23 of 31 January 1977, p. 12).
               It nevertheless appears to me that there are good grounds for doubting whether that interpretation is in accordance with the Community system.
               In its judgment of 10 December 1974 in Case 48/74 Charmasson ([1974] 2 ECR 1394) the Court of Justice stated inter alia that derogations which a national organization of the market may effect ‘from the general rules of the Treaty’ are only permissible to the extent necessary to ensure its functioning and in any event are limited to the transitional period. If, after the end of the transitional period, a common organization of the market has not been set up for products already subject to a national organization of the market the latter cannot operate in conflict with the general rules of the Treaty.
               Although in that case the problem arose essentially in relation to the prohibition on quantitative restrictions in intra-Community trade the general wording employed in the grounds for the judgment and the line of reasoning followed therein indicate that the duty of a national organization of the market to operate in accordance with the Treaty is not restricted to quotas. In the judgment in the Charmasson case more detailed reference is in fact made to the need for the ‘adaptation of a national organization to the rules provided for the establishment of the common market’; such rules undoubtedly include the prohibition on measures having an effect equivalent to quantitative restrictions and on charges having an effect equivalent to customs duties. In other cases the Court has emphasized the complementary nature of the relationship between those prohibitions and the prohibition on tax discrimination laid down in Article 95 of the Treaty; it thus appears logical to hold that that rule now applies in the agricultural sphere also, irrespective of the existence of a common organization of the market.
               Turning now to the problem of the applicability of Articles 92 and 93 to agricultural matters, it is important to note that the various regulations establishing common organizations of the market contain a provision stating that those articles apply to the sector governed by each particular organization. It is not, however, stated that it is necessary to establish a common organization of the market for every agricultural product. It is conceivable that certain sectors may operate satisfactorily, with regard to pursuit of the objectives set out in Article 39 of the Treaty, without its being necessary for them to come under a specific Community system containing measures for the direction of and intervention in production, marketing and prices, provided that the general rules concerning the establishment of the common market are observed. If, on the other hand, it were to be held that, even after the end of the transitional period, that is after the point indicated in Article 40 (1) of the Treaty as being decisive for the establishment of the common agricultural policy, the Member States should continue to enjoy a wide discretion in granting aids in the agricultural sectors which are not yet governed by a common organization of the market a situation incompatible with the full application of the abovementioned general rules to the sphere of agriculture would be rendered lawful. All Member States would, by the exercise of an unrestricted power to subsidize national undertakings, have in those sectors the possibility of hampering the movement of products of other Member States and of conferring a privileged position in matters of competition on domestic products. The granting of new State aids could become the means of reintroducing in another form restrictions on intra-Community trade and thereby of producing results similar to those arising from the measures which were considered to be at variance with the Treaty in the Charmasson judgment.
               I accordingly consider that, in the context of the system as it has been outlined in the light of the case-law of the Court of Justice, to continue to hold that the States have a free hand in the matter of aids in the agricultural sectors which are not yet (and perhaps never will be) governed by a common organization would distort that system. In accordance with the system of the Treaty it seems to me an inescapable conclusion that following the end of the transitional period the provisions of Articles 92 and 93 of the Treaty also apply to agriculture.
               I do not think it is a valid argument against that point of view to say that Regulation No 26 of the Council of 4 April 1962 merely declares (as I have noted above) that the provisions of Article 93 (1) and of the first sentence of Article 93 (3) alone shall apply. I doubt in fact whether that regulation, or at any rate that part of it, may still be regarded as being in force: more particularly whether Article 4 of Regulation No 26 is still in force. In this connexion it is worthy of note that all the provisions in the chapter concerning the rules on competition were declared to be applicable by the regulation in question (albeit with certain adjustments concerning Articles 85 (1) and 91 (1)) with the exception of Article 92, of Article 93 (2) and (3) — the latter as from the second sentence — and of Article 94. The reason for this pattern is indicated in the last recital of the preamble to Regulation No 26: it was intended that the Commission should be in a position ‘to draw up a list of existing, new or proposed aids, to make appropriate observations to the Member States and to propose suitable measures to them’; all of which was in order to ‘implement, as part of the development of the common agricultural policy, the rules on aids for production of or trade in agricultural products …’. The exclusion of Article 92, of a large part of Article 93 and of Article 94 was thus a transitional feature; furthermore, the whole of Regulation No 26 had a transitional purpose, as is indicated by the telling words of the first recital in the preamble (‘… the provisions hereinafter contained will have to be supplemented in the light of developments in that [common agricultural] policy’) and of the second recital (which provides inter alia for ‘the future establishment of a system of competition adapted to the development of the common agricultural policy’). Between 1962 and the present day there is no doubt that impressive developments have taken place in the common agricultural policy; I have already had an opportunity to emphasize that the provisions establishing common organizations of the market during that period have settled also the problem of State aids. At the same time the Court of Justice has upheld in its decisions the principle that the national organizations of the agricultural markets are subject to the basic provisions of the EEC Treaty. The conclusion which I think must be drawn from those factors is that Article 4 of Regulation No 26, having become incompatible with the system of Community rules at present governing agricultural matters, must be considered to have been abrogated on the ground of that incompatibility.
            
         
               3. 
            
            
               However, I do not wish to pass over the argument, supported by the Commission, that Article 4 of Regulation No 26 is still in force. In that case due weight must also be attached to observance in the agricultural sector of the provisions of Article 93 (1) and of the first sentence of Article 93 (3) of the Treaty, which are the sole provisions dealing with State aids. It is also necessary to consider the legal status of a national aid granted in breach of the first sentence of Article 93 (3).
               It seems to me helpful to bear in mind the events in the present case. There is no doubt that the adjustment of the German spirits monopoly which was effected by the said Law of 2 May 1976 had an effect upon the related system of State aids. Those aids fundamentally take the form of a guarantee that the monopoly will purchase domestically-produced spirits, at a price which is higher than the market price, and they entailed the need to increase the tax on consumption in order to meet the losses arising from the increasing divergence between the purchase price and the market price. According to the first sentence of Article 93 (3) the German Government was therefore obliged to notify the Commission of the draft adjustment legislation, which introduced a new system for financing the aid, in sufficient time to enable the Commission to submit its comments. The Federal Government interpreted this obligation rather widely and waited until the draft legislation was approved by Parliament before notifying the law as approved to the Commission on 23 April 1976, that is a mere nine days before it was promulgated by the President of the Republic on 2 May and fourteen days before it was published in the Bundesgesetzblatt on 7 May. In substance, then, the Commission was presented with a fait accompli, in clear breach of the duty to notify it in good time, which forms part of substantive law in that such breach prevents the Commission from giving useful expression to its views on the proposed aid.
               I am well aware that we are here outside the ambit of the procedure laid down by Article 169, which the Commission did not feel itself bound to initiate (thereby concurring in a rather mild interpretation of the first sentence of Article 93 (3)). Accordingly one can only attempt to establish in general terms the consequences which it was intended would flow from an infringement of that latter provision. In my view a measure enacted by a State which fails to meet the minimum conditions laid down by the above-mentioned provision must inevitably be held contrary to Community law. On an alternative view the duty to notify the Commission of any plans for aid would be in the nature of a merely minor procedural provision; a State which failed to make such notification would thus be in breach of that duty but the breach would not affect the lawfulness of the aid. Such a restrictive interpretation would plainly be contrary to the assumptions which I have taken as my point of departure: I refer to the fact that it is necessary to have due regard for Article 4 of Regulation No 26, if it must be considered that it is still in force. I therefore take the view that measures adopted by States which are at variance with the first sentence of Article 93 (3) are unlawful. Consequently, persons subject to duties under such measures need not consider themselves bound to observe them.
            
         
               4. 
            
            
               By Question 2 (a) the German court in substance asks whether the prohibition, imposed on Member States under Article 37, on the adoption on any new measures which are contrary to the prohibition on discrimination between nationals of Member States regarding the conditions under which goods are procured and marketed also applies to measures increasing the tax on consumption which, whilst uniformly applicable to domestic and imported products, is intended indirectly to compensate for the losses of a State monopoly arising from the imbalance between the high purchase prices guaranteed to domestic producers and the low selling prices of the products.
               It is clear that the wording of this question reflects the specific situation which has been created by the German law adjusting the spirits monopoly. The discriminatory nature of that law may be viewed from two aspects. First, only domestically-produced spirits are purchased by the monopoly at a price above the market price; secondly, those purchasing arrangements are financed through a tax on consumption which also applies to imported products, although such products do not enjoy the benefit of the guaranteed purchase price. There is also a third aspect which it will be appropriate to consider subsequently: the tax concessions for which certain categories of domestic producers qualify apply — if at all — only to a very limited degree to foreign producers.
               With regard to the first point I shall merely observe that it returns to the matter which I have already considered, namely the applicability of Articles 92 and 93. In fact the purchase of domestic spirits by the monopoly at a price kept artificially high is a means of ensuring the existence of an industry whose costs are higher than Community costs; it thus constitutes a form of aid granted by the State to own production. As I stated in replying to the first question, the fact that that aid is granted in the context of a State monopoly does not mean that this situation is to be assessed differently from that of the granting of aids unconnected with a monopoly. The discriminatory nature is embodied in the very concept of State aid. Accordingly, the problem must be viewed in the context of the compatibility of such aids with the common market, with particular reference to the agricultural sector.
               With regard to the second problem I believe that the points made in the settled case-law of the Court of Justice should be recalled: a type of charge which is imposed on specific products, both domestic and imported, and which is intended to support activities which specifically benefit the taxed domestic products — which are thus compensated for the taxation payable on them must be assessed in relation to Articles 9 and 12 of the Treaty (prohibition on charges having an effect equivalent to customs duties) and Article 95, with regard to discriminatory internal taxation. Such a fiscal device would in fact be a system of internal taxation in appearance only and accordingly could by reason of its protective character be termed a charge having an effect equivalent to customs duties (see the judgments of 19 June 1973 in Case 77/72 Capolongo [1973] 1 ECR 611) ; 18 June 1975 in Case 94/74 IGAV [1975] 1 ECR 699; 29 May 1977 in Case 105/76 Interzuccheri [1977] 1 ECR 1029). In accordance with that case-law ‘such a definition would nevertheless imply a clearly established connexion between, on the one hand, the collection of a fiscal duty levied without distinction on the products in question, whether domestic or imported, and, on the other hand, the advantage which enures only for the benefit of the domestic products by reason of the proceeds of that same duty’.
               There is no doubt, then, that from the duty to refrain from introducing charges having an effect equivalent to customs duties flows the prohibition on the imposition, by means of taxation, on competing products of other Member States, of the burden, or part thereof, of aids reserved to domestic products. It should also be emphasized that, although the said duty is based on Articles 9 and 12 of the Treaty, it is reinforced by Article 37 when the operations of a State monopoly of a commercial character are concerned. In this connexion it is sufficient to bear in mind Article 37 (2), which requires Member States to refrain from introducing ‘any new measure which is contrary to the principles laid down in paragraph (1)’ (in particular the said prohibition on discrimination between nationals of Member States regarding the conditions under which goods are procured and marketed) ‘or which restricts the scope of the articles dealing with the abolition of customs duties and quantitative restrictions between Member States’.
               It is for the national court which has made the reference to ascertain whether there is a connexion between the application of the charge and the financing of the aid. Nevertheless, I feel it proper to note that in the present case that connexion appears to be established by an express reference contained in the statement accompanying the draft of the Federal Law of 2 May 1976. In that statement it is in fact recognized that the increase in the tax on the consumption of spirits is intended to compensate for the loss incurred by the monopoly through the reduction in selling prices and the consequent negative imbalance between the guaranteed price at which the product is purchased from domestic producers and the selling price to consumers. In spite of that the representative of the Federal German Government stated in these proceedings that the charge is of a ‘neutral’ nature, maintaining that the reasons for which the legislature was prompted to increase the tax on consumption or the circumstances which determined that increase are irrelevant since, in his own words, ‘the legislature could equally well have found the necessary financial resources by increasing at will any other Federal tax’. For its part the undertaking Hansen doubts whether in fact there exists such a freedom of choice in matters of taxation in the present case. However, I consider it inappropriate to discuss the substance of a matter which specifically concerns national law and does not affect the interpretation of Community law. Regardless of whether the national legislature could perhaps have employed methods of taxation other than that which was adopted in order to finance the aid granted to domestic producers of spirits the relevant point is that, faced with the need to obtain new funds to meet the increased cost of that aid, the situation adopted was an increase in a tax arranged in such a way that part of the burden of financing the aid was placed on the identical product imported from the other Member States.
               In those circumstances I do not consider relevant the fact that the revenue from the tax in question, instead of being appropriated to a given fund intended specifically to finance the operations of the monopoly, was included in the general budget of the State, from which the sums necessary for that purpose were subsequently drawn. Likewise, I do not consider that the substance of the case is affected by the absence of complete parity between the sums collected through the increase in the tax in question and the sums intended to make good the losses of the monopoly arising from its support of domestic spirits production. In short, I think that the purpose of the measure in question in the political and economic context is more important that its form.
               The considerations which I have set out above also apply to Question 2 (b) submitted by the German court: I have in fact already set out my views as to the interpretation to be given to Article 37 (2) in circumstances resembling those of the present case.
            
         
               5. 
            
            
               It remains to consider the last of the problems of discrimination set out above in the context of Question 2 (a), namely the fact that the tax on consumption on imported products is heavier than on corresponding domestic products, which are favoured by a special system of reductions.
               I wish to point out first that in the context of the EEC Treaty matters of taxation are specifically governed by Articles 95 to 99. However, when the Finanzgericht Hamburg drafted its questions it referred invariably to Article 37 and not to Article 95, despite the fact that the latter was relied upon before it by Hansen and that appropriate menuon of it was furthermore made in the statement of the grounds for the order making the reference. I must therefore clarify the relationship between Article 37 and Article 95.
               The Court of Justice, in its judgment of 10 October 1978 in Case 148/77, Hansen & Balle v Hauptzollamt Flensburg, replied to preliminary questions referred to it by the Finanzgericht Hamburg concerning the prohibition on discrimination in the imposition of domestic taxation in the context of the German monopoly in spirits: those questions related both to Article 37 and to Article 95 of the EEC Treaty. The Court preferred to consider the problem of discrimination in the light of Article 95 on the ground that preferential arrangements consisting in reductions in taxation similar to those envisaged by the German Law on the Monopoly in Spirits for specified groups of distilleries can also exist independently of any connexion with a monopoly of a commercial character and, furthermore, that ‘Article 37 is based on the same principle as Article 95, that is the elimination of all discrimination in trade between Member States’.
               Article 37 is indeed intended to bring State monopolies into line with the basic provisions which govern the operation of the common market and in particular, as the Court stated in its said judgment of 10 October 1978, with the provisions which are intended to prevent the distortion of the conditions of trade between Member States, including the provision in Article 95 containing the prohibition of discrimination in taxation. Accordingly, in considering the requests for interpretation of Article 37 which gave rise to the present proceedings, it is also necessary to have regard to the principles laid down in the decisions of the Court of Justice for the purposes of an interpretation of Article 95.
               If, in the context of a commercial monopoly, a Member State uses a fiscal measure to finance an aid to domestic producers it must in any event observe the obligations arising from Article 95. As the Court is aware, that article prohibits all forms of discrimination, whether direct or indirect, between the products of one Member State and those of the other Member States in the imposition of domestic taxation, which thus falls upon both domestic products and imported products and is based on the same criteria. Furthermore, the judgment of the Court of 17 February in Case 91/75 Miritz makes clear that Article 37 covers all measures which are connected with the existence of a monopoly andaffect trade between the Member States in certain products, ‘and thus covers charges which result in discrimination against imported products as compared with national products coming under the monopoly’ ([1976] 1 ECR 230). This justifies the observation put forward in my opinion of 4 July 1978 in Case 148/77 Hansen & Balle, to the effect that the scope of the prohibition on discrimination laid down in Article 37 is substantially the same, in cases such as those which have been outlined above, as that of the prohibition on discrimination provided for in Article 95.
               In the present action, as the court making the reference has stated in its order, the tax on consumption applicable to domestic products, for the purposes of the Federal Law of 2 May 1976, is ultimately less onerous than that imposed on identical imported products. In fact, as was stated at the outset, certain classes of distilleries (those whose production is estimated at a standard level and those of fruit farm co-operatives) enjoy partial exemption from the tax together with significant abatements, neither being available to undertakings of other Member States.
               In that connexion the criteria set out by the Court of Justice in its judgment of 10 October 1978 in Case 148/77 should be recalled. ‘Preferential treatment reserved by national tax legislation to certain types of products or certain classes of producers’ is not as such prohibited in so far as it may ‘serve legitimate economic or social purposes, such as the use of certain raw materials by the distilling industry, the continued production of particular spirits of high quality, or the continuance of certain classes of undertakings such as agricultural distilleries’; however, ‘according to the requirements of Article 95, such preferential systems must be extended without discrimination to spirits coming from other Member States’. In connexion with the problems regarding similarity of treatment which may arise from the application of Article 95 in view of factors to which the legislation of the different Member States has linked the granting of the tax advantages concerned, such as the nature of the products, the technical characteristics of the equipment, the distilling processes, the taxation procedure and the methods of fiscal control, the Court of Justice emphasized that ‘the first paragraph of Article 95 refers to both “direct” and “indirect” discrimination, and that the application of that provision is based not on a strict requirement that the products should be identical but on their “similarity”.’
               In my view those criteria constitute sufficient guidance to enable a national court to settle the questions raised in the present case by the different treatment for tax purposes of domestic products and imported products.
            
         
               6. 
            
            
               The decisions of the Court of Justice already provide an affirmative answer to Question 2 (c). The judgment of 17 February 1976 in Case 45/75 Rewe ([1976] 1 ECR 181) concerning the interpretation of Article 37 of the EEC Treaty, likewise in relation to the German spirits monopoly, stated in paragraph 24 that ‘… the prohibition on all discrimination regarding the conditions under which goods are produced or put into circulation by nationals of the various Member States are procured and marketed constitutes a basic principle which, by its very nature, directly concerns the economic and legal position of those nationals. As a reference to a set of provisions which are actually applied to nationals, this rule is, by its very nature, capable of being directly invoked by those to whom it applies’. In the same judgment it was also stated that ‘when the [transitional] period has expired, the duty [embodied in Article 37] is no longer subject to any condition, nor can its performance or effects be subject to the adoption of any measure either by the Community or the Member States, and, by its very nature it is capable of conferring on those concerned individual rights which the national courts must protect’.
            
         
               7. 
            
            
               The Finanzgericht Hamburg further asks (Question 2 (d)) whether the sphere of application of Article 37 of the EEC Treaty also extends to measures affecting the importation of goods from third countries and if so subject to what conditions.
               In prohibiting new measures which are contrary to the principles laid down in Article 37 (1), paragraph (2) thereof precludes first and foremost measures embodying discrimination ‘regarding the conditions under which goods are procured and marketed … between nationals of Member States’, without drawing a distinction on the basis of the origin of the goods. The second part of paragraph (2) contains a prohibition on any measure which ‘restricts the scope of the articles dealing with the abolition of customs duties and quantitative restrictions between Member States’.
               Since measures of that nature, which naturally include the introduction of charges having an effect equivalent to customs duties, have a direct effect on the importation of goods it may be presumed that the court making the reference was concerned principally with this aspect of Article 37 when it drafted the above-mentioned question. The implicit reference made by the second part of paragraph (2) is to provisions (Articles 12 to 17 and 30 to 36) whose scope is restricted to trade between Member States; this accords with the fact that monopolies are governed by Article 37 chiefly as bodies which supervise, determine or appreciably influence imports or exports between Member States (second subparagraph of Article 37 (1)). However, when considering measures adopted by a monopoly or related to its existence which also concern the importation of goods from third countries it is impossible to disregard those principles or provisions which, whilst not referred to in Article 37, also apply to the operations of the monopoly. By that I mean in particular the principle that the prohibition on charges having an effect equivalent to customs duties also applies to the importation of goods coming directly from third countries; that principle was clearly upheld by the Court of Justice in its judgment of 13 December 1973 in Joined Cases 37 and 38/73 Diamantarbeiders ([1973] 2 ECR 1609).
               Likewise, the wording of Article 37 does not cover the prohibition referred to in Article 95 which, as we have indeed seen, applies to any tax measures which may be adopted in connexion with monopolies. In this context I think I should point out that that prohibition cannot be extended to measures of taxation concerning goods imported from third countries since, as it is worded, that provision refers to the imposition of discriminatory charges on the products of other Member States.
               
               With reference to the third and last question I have to observe that the attention drawn by the court making reference to Article 2 (1) of the Council Decision of 29 September 1970 on the Association of the Overseas Countries and Territories with the European Economic Community is justified in so far as that decision provides that products originating in the countries and territories shall on importation into the Community be admitted ‘free of customs duties and charges having equivalent effect’; however, once it has been established that all goods imported from third countries are covered by the prohibition against the imposition (through or in the context of a monopoly system) of charges having an effect equivalent to customs duties the reply to the third question no longer appears relevant. It seems to me more helpful to emphasize that Article 5 (1) of the said decision of the Council requires Member States to refrain from any internal fiscal measure or practice that directly or indirectly leads to discrimination between their own products and like products originating in the overseas countries and territories associated with the Community. In that way the principle embodied in Article 95 is extended in practice to products coming from such countries and a derogation is made from the criterion drawn from the wording of the said Article 95, to the effect that the prohibition on discriminatory charges does not apply to goods imported from third countries.
            
         
               8. 
            
            
               For all the reasons set out above I conclude by suggesting that the Court should reply with the following ruling to the questions referred to it pursuant to Article 177 of the EEC Treaty by the Finanzgericht Hamburg in its order of 27 March 1978:
               
                        1.
                     
                     
                        Arrangements for the granting of aids by States to undertakings, even if such arrangements relate to the operation of a State monopoly and, after the end of the transitional period, even if they concern agricultural products not covered by a common organization of the market, are governed by the provisions of Articles 92 and 93 of the EEC Treaty.
                     
                  
                        2.
                     
                     
                        A breach of the obligation to inform the Commission ‘in sufficient time’ of any plans to grant or alter aid (first sentence of Article 93 (3) of the EEC Treaty) provided by a State automatically renders unlawful the State measures whereby the aid is granted.
                     
                  
                        3.
                     
                     
                        The obligation imposed on the Member States by Article 37 (2) of the EEC Treaty to refrain from introducing any new measure which is contrary to the principles laid down in paragraph (1) or which restricts the scope of the articles dealing with the abolition of customs duties constitutes a prohibition on any increase in the tax on the consumption of specified domestic or imported goods which is intended directly or indirectly to finance an aid granted by a State monopoly to domestic producers of the same goods.
                     
                  
                        4.
                     
                     
                        The prohibition on discrimination in matters of taxation laid down in Article 95 of the EEC Treaty, which is fully effective within the ambit of Article 37, prohibits a situation where, through a differentiated system of benefits and reductions, certain charges fall less heavily on domestic products than on imported products.
                     
                  
                        5.
                     
                     
                        In so far as the provisions of Article 37 of the EEC Treaty entail a reference to the provisions of that Treaty which have direct effect in relation to individuals they create individual rights which the national courts must protect.
                     
                  
                        6.
                     
                     
                        The prohibition on the application by monopolies or in relation to their operation of charges having an effect equivalent to customs duties also applies to goods imported directly from third countries.
                     
                  
                        7.
                     
                     
                        Whilst the prohibition on discriminatory taxation is not as such applicable to products imported from third countries it applies to products coming from overseas countries and territories associated with the Community, pursuant to Article 5 (1) of the Council Decision of 29 September 1970.
                     
                  
         (
            1
         )	Translated from the Italian.
      (
            2
         )	Translator's note: Mr Capotorti's comments a; this point appear to be based on a discrepancy between the German and Italian versions of the questions submitted by the Finanzgericht.