CELEX: 61981CC0249
Language: en
Date: 1982-09-15
Title: Opinion of Mr Advocate General Capotorti delivered on 15 September 1982. # Commission of the European Communities v Ireland. # Measures having equivalent effect - Promotion of domestic products. # Case 249/81.

OPINION OF MR ADVOCATE GENERAL CAPOTORTI
      DELIVERED ON 15 SEPTEMBER 1982 (
            1
         )
      
         Mr President,
      
      
         Members of the Court,
      
      
               1. 
            
            
               In this case the procedure provided for in the second paragraph of Article 169 of the EEC Treaty is being used by the Commission to charge Ireland with infringing Article 30 of that Treaty by adopting certain initiatives, in particular in the form of advertising, intended to promote the sale of Irish products. It is therefore essentially a matter of deciding whether such initiatives fall within the concept of “measures having an effect equivalent to quantitative restrictions on imports”.
               So far as the facts are concerned, I will remind the Court that, by a letter of 28 May 1979, the Commission opened the procedure laid down in the first paragraph of Article 169 of the EEC Treaty, by inviting the Irish Government to submit its observations on the compatibility with Community law of a series of measures which it had taken in the context of the three-year programme for the promotion of the sale of Irish products, announced in January 1978. As was stated at pages 3 and 4 of the letter, the measures which the Commission found incompatible with Article 30 were the following:
               
                        (a)
                     
                     
                        the introduction of a “Guaranteed Irish” symbol and the possibility for the consumer to refer any complaints concerning products bearing that symbol to the Irish Goods Council, an association financed and controlled by the Irish Government;
                     
                  
                        (b)
                     
                     
                        the creation of the “Shoplink Service”, intended to provide the consumer with information on products made in Ireland, by means of five centres located in Dublin, Cork, Limerick, Waterford and Galway;
                     
                  
                        (c)
                     
                     
                        the promotion of various forms of advertising of Irish products by means of the Irish Goods Council; and
                     
                  
                        (d)
                     
                     
                        the exhibition facilities available for domestic products only in the Ireland House Trade Centre, Dublin, a body which has equipped space of over 2000 square metres and is run by the Irish Goods Council.
                     
                  In a letter of 20 July 1979, the Irish Government admitted that it had introduced in 1978 a three-year programme to promote the sale of Irish products and informed the Commission that it was about to extend to imponed Community products the exhibition facilities available at the Ireland House Trade Centre and the advantages connected with the Shoplink Service. But those proposals were not put into effect; in a reasoned opinion issued on 25 February 1981 the Commission therefore declared that the Irish authorities had not discontinued any of the above-mentioned measures and confirmed its finding that Ireland had infringed Article 30 of die EEC Treaty.
               On 5 May 1981, at a meeting between Commission officials and Irish officials, the latter were able to inform the Commission that the Irish Government had decided to terminate both the Shoplink Service scheme and the exhibition facilities at the Ireland House Trade Centre. However, the Irish Government provided no assurances or new information in relation to the other two groups of measures. The Commission therefore decided on 15 September 1981 to submit the application which I am about to examine.
            
         
               2. 
            
            
               The abolition of some of the Irish measures, of which the Commission was notified on 5 May 1981, clearly reduced the area of the dispute; on the other hand, it seems that the advenising was not ended after the expiry of the three-year programme lasting from 1978 to 1981. In that regard, it should be remembered that, from 1978 at least, the Irish Goods Council financed and conducted an extensive advertising campaign for the promotion of Irish products, inviting traders to sell and consumers to buy. The campaign was conducted in newspapers and magazines and also on television and radio; for example, the Irish Times of 24 June 1981 carried the announcement “Insist on ‘Guaranteed Irish’ products — Tip the balance”, whilst advertising on television and radio used the slogan “Tip just a few purchases over to Irish products and tip jobs in Ireland's favour”. I note that one of the aims of this advertising campaign was undoubtedly to substitute domestic products for imponed products. That is clear from the speech delivered on 18 January 1978 by Mr Desmond O'Malley, the Minister for Industry; on that occasion the Minister stated inter alia that the target of the government's three-year programme for the promotion of Irish goods was “a switch from imports to Irish products equivalent to 3 % of total consumer spending, with a corresponding shift in industrial spending”. Similarly, the speech delivered on 9 April 1981 by Mr Raphael Burke, the Minister for the Environment, again referred to the government initiatives on “the promotion of import substitution”; he announced in particular that a special working party composed of representatives of producers organizations, trade unions and public authorities had been asked to “consider possible measures to promote import substitution and greater purchases of Irish goods”, and had introduced an “intensive programme” involving inter alia the compilation of a directory of Irish building materials. However, according to the Irish Government, that group ceased activity in June 1981.
               In conclusion, it seems to me that the established facts of a permanent nature on which attention should be focused in this case are the following: the Irish Government controls and to a considerable extent finances the Irish Goods Council; that Council carries on a wide range of activities for the promotion of the sale of Irish products; the Irish Government has further supported that promotion campaign by means of certain official statements and through the cooperation of the competent ministers.
            
         
               3. 
            
            
               What is the position of the Irish Goods Council under Irish law? It is an association (to be precise, a “company limited by guarantee and not having a share capiul”), formed by a certain number of representatives of commercial undertakings (company managers, company executives, accountants), and open to other members — individuals or undertakings — whose principal objectives are to promote sales of Irish goods and services in Ireland, to contribute to improvements in the sundards of design and quality of Irish products (and methods of packaging, distribution and marketing), to provide a comprehensive information service concerning Irish goods and services (see Memorandum of Association, Article 2 (b), (c), (d) and (e)).
               The links between the Irish Government and the Irish Goods Council are very close. It will be sufficient to point out that any amendment to the Memorandum or Articles of Association must be approved by the Minister for Industry — in certain cases, after consultation with the Minister for Finance (Article 4 of the Memorandum of Association); that all the members of the Management Committee are appointed by the Minister for Industry, who is also responsible for appointing the chairman (Articles 32 and 44 of the Anieles of Association); that the auditors are appointed with the approval of the Minister for Industry after consultation with the Minister for Finance (Article 60 of the Articles of Association) and that the government's contribution to the Council's budget from 1978 to 1981 represented a share varying between 4/5 and 5/6 of the association's total funds — that follows from the Irish Government's answers to the questions put to it by the Court and in particular from the table which sets out the fovernment financing next to the contriution from industry.
               In view of those factors, I consider that the Irish Goods Council has the same appearance as a public institution with auxiliary functions in the economic field; more precisely, it constitutes an instrument which: (a) pursues objectives which correspond or are parallel to certain objectives of the Irish Government, with regard to the development of national economic activity, and (b) may be used or influenced by that government. However, that does not mean that the Council is in the position of a public “authority”: it is not an organ of the State, it does not exercise any power over persons, and cannot adopt any measure capable of binding individuals. Thus it is in my opinion true that the Irish Goods Council's initiatives may be regarded in the same way as the Irish Government's initiatives, particularly where they are part of a programme openly supported by the ministerial authorities (as was the case here); but it should not be forgotten that the Council is only an auxiliary instrument of the State and that none of its initiatives may be described as a measure of a public authority.
            
         
               4. 
            
            
               From the considerations set out above it may be established that the financing of the Irish Goods Council by the Irish Government is not an action which may be assessed independently in the light of Community law but is only part of the evidence of the connection between the Government and the Council. Therefore I do not share the view expressed in the Commission's reply to the questions put to it by the Court to the effect that such financing of itself constitutes a measure having equivalent effect within the meaning of Article 30. It is certainly not the public financing of the Irish Goods Council that impedes imports from other Member States; rather, there is a danger that certain activities of the Council may adversely affect intra-Community trade, and public financing is an important factor in relation to the question of the link between those activities and the Irish Government.
               Having clarified that point, we must now broach the central issue in this case: namely, whether an advertising campaign for the promotion of domestic products, which may be considered to be attributable to the government of a Member State, either because it is conducted by an institution financed and controlled by that government or because it is supported by ministers' speeches and technical cooperation on the pan of the public authorities, is covered by the prohibition on measures having an effect equivalent to quantitative restrictions on imports (Article 30 of the EEC Treaty).
               I will state at once that, in my opinion, the problem cannot be resolved on the basis of the arguments put forward by the Commission and derived from the provisions of Commission Directive No 70/50 of 22 December 1969 on the abolition of measures which have an effect equivalent to quantitative restrictions on imports and are not covered by other provisions adopted in pursuance of the EEC Treaty. According to Article 2 (2), the direttive covers “... measures which favour domestic products or grant them a preference, other than an aid, to which conditions may or may not be attached”; that definition includes in particular, as is stated in Article 2 (3) (k), measures which “hinder the purchase by private individuals of imported products only, or encourage, (
                     2
                  ) require or give preference to the purchase of domestic products only”. The second recital in the preamble to the directive states that for these purposes “‘recommendations’ (
                     2
                  ) means any instruments issuing from a public authority which, while not legally binding on the addressees thereof, cause them to pursue a certain conduct”. In fact, even if the provision contained in Article 2 (3) (k) could be regarded as containing a form of legislative interpretation of the term “measures having equivalent effect” in Article 30 of the EEC Treaty (that is to say, a form of interpretation which is generally binding in effect), there would be reason to doubt whether the advertising conducted in this case by an institution which is connected with the Irish Government but does not have the power of a public authority, could be described as a recommendation issuing from a public authority and capable of determining the conduct of the addressees: that type of measure is reminiscent rather of a recommendation made by a public office to dependent offices in order to persuade them to buy only domestic products. But in any event the better view is that the Commission did not have the power to define by its own rules the concept of measures having an effect equivalent to a quantitative restriction.
               The directive in question was adopted by the Commission on the basis of Article 33 (7) of the EEC Treaty; reference is in fact made to that provision both in the first recital in the preamble and in the title of the directive (where it is stated that the directive is “based on the provisions of Article 33 (7)”). That provision states that: “The Commission shall issue directives establishing the procedure and timetable in accordance with which Member States shall abolish, as between themselves, any measures in existence when this Treaty enters into force which have an effect equivalent to quotas.” Thus the usk entrusted to the Commission consisted only in laying down the procedure and the timeuble for the abolition of measures having equivalent effect. It does not seem to me that that implied that the Commission was entitled to determine the scope of the term “measures” in Article 30.
               On that point the Commission observes that, because in order to lay down the timeuble and procedure for the abolition of such measures it was essential to define the scope of the words “measures having an effect equivalent to quantiutive restrictions”, it was for the Commission itself to implement Article 30 even in this subsuntive sense. However, I do not think that such an argument can be accepted. It is one thing to issue procedural rules — which, according to the second paragraph of Article 32 are to have effect only during the transitional period — and another to adopt measures relating to the substantive scope of a provision as complicated as Article 30. Nor is it valid to object, as does the Commission, that the Member States have never challenged the 1969 directive: a measure which is illegal on the ground of lack of competence cannot be made legal by the Member States' acquiescence, and, moreover, up to now there has never been litigation which has called in question the compatibility with Article 30 of non-binding intervention on the part of the public authorities. I therefore remain of the opinion that the guidelines included in Commission Directive No 70/50 can have no bearing on die problem to be solved in this case; they merely demonstrate the Commission's consistency in its interpretation of Article 30.
            
         
               5. 
            
            
               Recently the Court of Justice has had occasion to consider the effect of advertising on the sale of imported products; I refer to the judgment of 10 July 1980 in Case 152/78 Commission v French Republic [1980] ECR 2299. The issue to be decided in that case was whether restrictions laid down by national rules on freedom of advertising for certain products (alcoholic beverages), although not directly affecting imports, were nevertheless capable of restricting their volume inasmuch as they affected the marketing prospects for the imported products. The Court decided that national legislation of that kind may constitute a measure having an effect equivalent to a quantitative restriction within the meaning of Article 30 of the EEC Treaty (see paragraphs 11 to 14 of the decision). It should, however, be emphasized that although the measures under consideration by the Court related to advertising they were of a compulsory nature: that is to say, they consisted, as I have said, of legislative provisions intended to restrict the use of advertising for certain products. Therefore the decision cited must be included amongst those which describe as measures having equivalent effect certain forms of public intervention which are legally binding.
               Pointing out that the judgment in question recognizes the influence of advertising on the volume of imports, the Commission argues that, by supporting advertising initiatives for the promotion of domestic products, a State ipso facto infringes Article 30 of the EEC Treaty. However, I find that argument unconvincing. To state that advertising may have an effect on consumption and thus on imports is to lay down an elementary economic principle, but that does not mean that the promotion of the sale of domestic products by means of an advertising campaign financed by public money necessarily falls within the concept of measures having an effect equivalent to quantitative restrictions contained in Article 30. I therefore remain of the opinion that the judgment of 10 July 1980 cannot be used to support an interpretation of the disputed concept extended to cover advertising initiatives such as that concerned in this case.
            
         
               6. 
            
            
               According to the Irish Government's defence, the “measures” referred to in Article 30 are exclusively measures of the public authorities which have binding effect. In support of that argument it cites decisions of the Court, in particular the judgment of 11 July 1974 in Case 8/74 Procureur du Roi v Dassonville [1974] ECR 837, where it was held that: “All trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade are to be considered as measures having an effect equivalent to quantitative restrictions” (paragraph 5 of the decision). The Court expressed the same view in its judgments of 8 July 1975 in Case 4/75 REWE-Zentralfinanz v Landwirtschafiskammer [1975] ECR 843 and of 20 May 1976 in Case 104/75 De Peijper [1976] ECR 613: in the first of those judgments it ruled that national rules which provided for phytosanitary inspections at the frontier for imported plant products were measures having equivalent effect, and in the second it ruled that national rules or practices which resulted in imports being channelled in such a way that only certain traders could effect those imports, whereas others were prevented from doing so, were also incompatible with Article 30. It is significant that the De Peijper judgment made no attempt to distinguish between legislative measures and administrative practices: both are instances of intervention by the authorities with binding effect, and that justifies their being treated in the same manner for the purposes of the decision in that case.
               According to the Irish Government's defence, it may be concluded from the trend of those cases that simple advertising initiatives without any binding force do not fall within the scope of Article 30. However, I believe that the most that may be said is that the Court has not so far had occasion to consider the problem of advertising initiatives on the part of Member States in support of domestic products. In other words, it is true that all the cases in which the Court has established the existence of measures having equivalent effect within the meaning of Article 30 have related to legislative or administrative measures which were to some extent legally binding; but it is equally true that until now the Court of Justice has not been called upon to determine whether Article 30 applies to state initiatives which have no binding force. The question therefore remains open.
               In my opinion, the solution to this problem is to be sought by taking into account three considerations. First, the equivalence between quantitative restrictions and the “measures” referred to in Articles 30 and 34 must be determined by insisting that the latter, like the former, must constitute measures adopted by the public authorities, acting in the exercise of their authority. In my view, the scope which the Court has conferred on the concept of measures having equivalent effect — by accepting that their effect on trade may be direct or indirect, actual or potential — is justified as long as it remains a question of measures adopted by the authorities: laws, administrative measures, and administrative practices. However, it would be going too far if, through the inclusion in the concept “measures” of initiatives taken at a level not involving the exercise of public authority, an indirect link with the State were recognized in addition to the potential and indirect nature of the obstacle to imports resulting from advertising in favour of domestic products.
               Secondly, I regard as significant the formula used in Article 36 (“The provisions of Articles 30 to 34 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on ... etc.”), since that provision operates in close connection with Anieles 30 and 34 and makes lawful certain quantitative restrictions or measures having equivalent effect. There is an implied reference to both in the phrase “prohibitions or restrictions”: a phrase which may not be extended so as to include recommendations.
               Thirdly, I believe that, by having separated the rules on the free movement of goods from the rules on competition, the general scheme of the Treaty has placed on two different levels barriers or obstacles to intra-Community trade, which are introduced through measures adopted by the public authorities, and activities by which competition is restricted or distorted, which may be pursued not only by undertakings but also by States, in the form of aids. In the present case it seems clear to me that the contested activities are in the nature, not of barriers or obstacles to trade established by the public authorities, but rather of public aid whereby it is sought to give domestic producers a competitive advantage over foreign producers. Therefore it is from that standpoint that the subject requires further consideration.
            
         
               7. 
            
            
               It is well known that under Article 92 (1) of the EEC Treaty “any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market”. That provision has frequently been interpreted in such a way that the reference to “certain undertakings or the production of certain goods” has a strictly limited meaning: in other words, as if the only State aids declared incompatible with the common market were those of a sectorial nature. But I consider that that interpretation is mistaken. It is sufficient to observe that among the categories of aid which are or may be considered to be compatible with the common market (Article 92 (2) and (3) there are some which are clearly not sectorial in character (such as aid to make good the damage caused by natural disasters, or aid to remedy a serious disturbance in the economy of a Member State); it is not clear why it should have been necessary to mention such aids if the general rule of incompatibility contained in paragraph (1) of the article in question concerned only sectorial aids. In any case, quite apart from the wording of Article 92, I take the view that it is perfectly justifiable to speak of a general principle of the prohibition of public aids to domestic products, if one wishes to avoid the incongruous view that sectorial aids are prohibited and those of wider scope are permitted. Finally, I will repeat the Court's statement in its judgment of 10 December 1969 in Joined Cases 6 and 11/69 Commission v French Republic [1969] ECR 523, paragraph 18: “Under Article 92 the Member States have agreed that any aid granted by them in any form whatsoever which distorts or threatens to distort competition is incompatible with the common market.” That case concerned a preferential rediscount rate for exports, granted by a State for domestic products only, and the Court held that it was an aid within the meaning of Article 92.
               In this case, the advertising campaign inspired and financed by the Irish Government, in my opinion, clearly constitutes a form of aid and must be assessed on the basis of Article 92 of the EEC Treaty. That campaign in fact takes the place of the advertising initiatives which individual Irish manufacturers (or associations of manufacturers effectively independent of the government) might lawfully have undertaken; and it obviously reduces the costs of Irish products — thus distorting competition in the common market — in so far as the burden of paying for the advertising is borne by an institution closely linked to the State.
               In its reply to the questions put to it by the Court, the Commission stated that the financing of the Irish Goods Council by the Irish Government cannot be regarded as an aid within the meaning of Article 92. That is formally correct, because the Council is not an undertaking benefiting from a State aid but an association whose special nature I have tried to make clear above. But the decisive point is that the entire collection of advertising initiatives undertaken by the Council represents a form of aid if, as I believe, it is true that that body emanates from the Irish Government (or, at least, in so far as that body is financed with public money).
            
         
               8. 
            
            
               The result of the view which I have taken is that in this case the Commission ought to have followed the procedure laid down in Article 93 ot the EEC Treaty. It preferred to use Article 169 to accuse Ireland ot infringing Article 30: but I take the view, for the reasons set out above, that there has been no such infringement. I therefore conclude that the application should be dismissed and the Commission ordered to pay the costs incurred by the defendant.
            
         (
            1
         )	Translated from the Italian.
      (
            2
         )	Translator's note: The Italian version of the directive uses the verb “incitano” in Article 2 (3) (k) and the noun “indumento” in the preamble, whereas the English version uses “encourage” and “recommendation”.