Federal Republic of Germany v Council of the European Union.
Date: 1994-10-05
27 The Federal Republic of Germany puts forward three arguments in support of this plea in law.
28 It argues firstly that the procedure whereby the Regulation was adopted was irregular, in that the text of the Regulation diverges from the Commission' s initial proposal, without there having been a new proposal formally adopted by the college of Commissioners. The right of proposal referred to in Article 43 of the Treaty is a right for the Commission itself to take part in the shaping of Council measures and it is not permissible for the member of the Commission in charge of a matter simply to approve in the name of the Commission an agreement drawn up within the Council. Article 27 of the Rules of Procedure of the Commission (OJ, English Special Edition, Second Series VII, p. 9) does not permit members of the Commission, by derogation from the principle of collegiality, to be empowered to take measures other than clearly defined measures of management or administration.
29 The Federal Republic of Germany argues secondly that the Regulation is vitiated by a defective statement of reasons, in that it refers only to the first proposal from the Commission.
30 It argues thirdly that in view of the substantial nature of the changes made in the second proposal from the Commission, the European Parliament should have been consulted again. In this respect the applicant refers to two substantial changes. The 20% ad valorem customs duty, consolidated in GATT, which was maintained in the first proposal, was replaced by a specific duty of ECU 100 per tonne. The tariff quota share of 30% of third-country bananas was open in the first proposal to importers of third-country bananas who undertook to market a specific quantity of Community and/or traditional ACP bananas; also under the original scheme new importers could have taken part in that partnership arrangement, whereas their quota share is now limited to 3.5% of the tariff quota.
31 The Council, supported in particular by the Commission, maintains that the procedure for adopting the Regulation was regular and that the Council had before it an amended proposal from the Commission; it argues that the Regulation does not have to refer both to the original proposal from the Commission and the subsequent amendments, and that the amendments made did not render it necessary for the Parliament to be consulted again.
32 In order to examine whether the procedure for adopting the Regulation was regular, it is appropriate to summarize its course as set out in the written pleadings and oral observations of the Council and Commission. According to the statements of the Commission, which have not been contested by the applicant, the college of Commissioners mandated the Member responsible for agriculture to conduct the negotiations on bananas at the Council of Ministers of 14-17 December 1992, in the context of an overall agreement. Following the session of the Council the Member of the Commission responsible informed the college of Commissioners of the outcome of the session, including the banana agreement, without the college expressing any objection either as to the procedure followed or as to the outcome of the negotiations.
33 On 12 February 1993 the competent Member of the Commission declared to the Council:
The Commission confirms that the text before us reflects the Commission' s proposal as amended in the political agreement of December, as that political agreement has been transposed into legal provisions in the text which the Council will vote on.
34 On 13 February 1993 the Council adopted the Regulation by a qualified majority vote.
35 It follows from the course of the procedure, having regard in particular to the declaration made before the Council on 12 February 1993 by the competent Member of the Commission, that when it made its final decision, on 13 February, the Council had before it a proposal from the Commission amended in accordance with the political agreement accepted by the competent Member on behalf of the Commission at the Council session in December 1992 and approved by the college of Commissioners.
36 The fact that that amended proposal was not in writing is of no consequence. Article 149(3) of the Treaty states that as long as the Council has not acted, the Commission may alter its proposal at any time during the procedures mentioned in paragraphs 1 and 2, and it does not require those amended proposals necessarily to be in writing. Such amended proposals are part of the Community legislative process, which is characterized by a certain flexibility, necessary for achieving a convergence of views between the institutions. They are fundamentally different from the acts which are adopted by the Commission and are of direct concern to individuals. In those circumstances strict compliance with the formalities prescribed for the adoption of acts of direct concern to individuals cannot be required for the adoption of such proposals (see the judgment of 15 June 1994 in Case C-137/92 P BASF [1994] ECR I-0000).
37 As to the lack of a citation referring to the alleged second proposal, the Court finds that there was no new proposal, but merely an amendment to the original proposal. Although under Article 190 of the Treaty the proposal from the Commission must be referred to in acts which can be adopted only on a proposal from the Commission, that article does not require citation of any amendment which may subsequently have been made to that proposal. The position would be different only if the Commission had withdrawn its proposal and replaced it by a fresh proposal.
38 In assessing the cogency of the argument that the European Parliament was not consulted a second time, it should be noted that a fresh consultation of the European Parliament is required whenever the text finally adopted, taken as a whole, differs in essence from the text on which the Parliament has already been consulted, except in cases where the amendments substantially correspond to the wishes of the Parliament itself (judgments in Case C-65/90 Parliament v Council [1992] ECR I-4593, paragraph 16, and Joined Cases C-13/92 to C-16/92 Driessen and Others v Minister van Verkeer en Waterstaat [1993] ECR I-4751, paragraph 23).
39 The Court must therefore examine whether the amendments referred to by the applicant relate to the very essence of the text taken as a whole.
40 In this respect the Commission' s original proposal, like the amended proposal, provided for a quota of two million tonnes for third-country bananas and non-traditional ACP bananas in order to curb imports. The substitution of the specific customs duty for the ad valorem duty, while constituting a legal amendment, is in pursuit of that objective. It has not been shown that the introduction of the specific duty was meant to have the effect of increasing the restrictions on the import into the Community of third-country bananas given that the specific duty did not represent a greater financial burden for importers than the 20% ad valorem duty. It may be added that the ad valorem duty, although consolidated in GATT, was applicable only in certain Member States of the Community, while most States other than the applicant had more restrictive rules on imports.
41 The subdivision of the import quota, both in the original proposal and in the amended proposal, is intended, as the thirteenth recital in the preamble to the Regulation states, to make a distinction between operators who have previously marketed third-country bananas and non-traditional ACP bananas and operators who have previously marketed bananas produced in the Community and ACP bananas, while leaving a quantity available for new operators. The creation of subquotas for the various categories of operators, in preference to the partnership arrangements originally proposed, only relates to a technical means of implementing that distinction, which the Council was able to regard as essential for ensuring sales of Community and ACP bananas and which does not affect the basic structure of the regulation.
42 The Commission' s amendments to its proposal thus did not affect the very essence of the Regulation taken as a whole, and therefore did not make it necessary for the Parliament to be consulted anew.
43 Consequently, the first plea in law, alleging a breach of essential procedural requirements, must be rejected.
Breach of substantive rules of Community law
46 The Federal Republic of Germany submits that the objectives of the Regulation, namely safeguarding Community production and maintaining the income of Community producers, do not come under Article 39 of the Treaty. Guaranteeing the income of the agricultural population can be ensured only by increasing productivity. The imbalance between supply and demand and the considerable rise in banana prices, in particular on the German market, clearly show that the Regulation, contrary to Article 39, does not stabilize markets, assure the availability of supplies, or ensure that supplies reach consumers at reasonable prices.
47 In assessing whether those complaints are well founded, it should first be noted that the Court has held that in pursuing the objectives of the common agricultural policy the Community institutions must secure the permanent harmonization made necessary by any conflicts between those objectives taken individually and, where necessary, give any one of them temporary priority in order to satisfy the demands of the economic factors or conditions in view of which their decisions are made (Case C-311/90 Hierl v Hauptzollamt Regensburg [1992] ECR I-2061, paragraph 13). The Court has also held that, in matters concerning the common agricultural policy, the Community legislature has a broad discretion which corresponds to the political responsibilities imposed on it by Articles 40 and 43 (see Joined Cases C-267/88 to C-285/88 Wuidart and Others v Laiterie Coopérative Eupenoise [1990] ECR I-435, paragraph 14, and Hierl, cited above, paragraph 13).
48 Moreover, Article 39(1) of the Treaty expressly refers in subparagraph (a) to increasing productivity and in subparagraph (b) to ensuring a fair standard of living for the agricultural community, and Article 40(3) provides for various means to ensure that those objectives are attained, including aids for production or marketing and common machinery for stabilizing imports of the type introduced by the Regulation.
54 In this respect it should be noted, firstly, that Article 43 of the Treaty is the appropriate legal basis for any legislation concerning the production and marketing of agricultural products listed in Annex II to the Treaty which contributes to the achievement of one or more of the objectives of the common agricultural policy set out in Article 39 of the Treaty. Consequently, even where that legislation is directed both to objectives of agricultural policy and to other objectives pursued on the basis of other Treaty provisions, the existence of those provisions cannot be relied on as a ground for restricting the field of application of Article 43 of the Treaty (see the judgments in Case 68/86 United Kingdom v Council [1988] ECR 855, paragraphs 14 and 16, and Case C-131/87 Commission v Council [1989] ECR 3743, paragraphs 10 and 11).
61 Recognition is thus given to both the priority of the agricultural policy over the objectives of the Treaty in the field of competition and the power of the Council to decide to what extent the competition rules are to be applied in the agricultural sector.
67 It is settled law that the prohibition of discrimination laid down in that provision is only a specific expression of the general principle of equality which is one of the fundamental principles of Community law (see Case C-177/90 Kuehn v Landwirtschaftskammer Weser-Ems [1992] ECR I-35, paragraph 18, and Case C-98/91 Herbrink v Minister van Landbouw, Natuurbeheer en Visserij [1994] ECR I-223, paragraph 27) and which requires that comparable situations are not treated in a different manner unless the difference in treatment is objectively justified (see Joined Cases 201/85 and 202/85 Klensch and Others v Secrétaire d' Etat [1986] ECR 3477, paragraph 9, and Wuidart and Others, cited above, paragraph 13).
68 The common organization of the market for the banana sector covers economic operators who are neither producers nor consumers. However, because of the general nature of the principle of non-discrimination, the prohibition of discrimination also applies to other categories of economic operators who are subject to a common organization of a market.
74 However, such a difference in treatment appears to be inherent in the objective of integrating previously compartmentalized markets, bearing in mind the different situations of the various categories of economic operators before the establishment of the common organization of the market. The Regulation is intended to ensure the disposal of Community production and traditional ACP production, which entails the striking of a balance between the two categories of economic operators in question.
77 With reference to infringement of the right to property, the applicant submits that by depriving operators who traditionally marketed third-country bananas of market shares for a long period of time, the Regulation breached those operators' right to property and infringed their freedom to pursue their trade or business.
78 Both the right to property and the freedom to pursue a trade or business form part of the general principles of Community law. However, those principles are not absolute, but must be viewed in relation to their social function. Consequently, the exercise of the right to property and the freedom to pursue a trade or profession may be restricted, particularly in the context of a common organization of a market, provided that those restrictions in fact correspond to objectives of general interest pursued by the Community and do not constitute a disproportionate and intolerable interference, impairing the very substance of the rights guaranteed (Case 265/87 Schraeder v Hauptzollamt Gronau [1989] ECR 2237, paragraph 15, Case 5/88 Wachauf [1989] ECR 2609, paragraph 18, and Kuehn, cited above, paragraph 16).
79 The right to property of traders in third-country bananas is not called into question by the introduction of the Community quota and the rules for its subdivision. No economic operator can claim a right to property in a market share which he held at a time before the establishment of a common organization of a market, since such a market share constitutes only a momentary economic position exposed to the risks of changing circumstances.
80 Nor can an economic operator claim an acquired right or even a legitimate expectation that an existing situation which is capable of being altered by decisions taken by the Community institutions within the limits of their discretionary power will be maintained (Case 52/81 Faust v Commission [1982] ECR 3745, paragraph 27), especially if the existing situation is contrary to the rules of the common market.
82 The restriction of the right to import third-country bananas imposed on the economic operators on the German market is inherent in the establishment of a common organization of the market designed to ensure that the objectives of Article 39 of the Treaty are safeguarded and that the Community' s international obligations under the Lomé Convention are complied with. The abolition of the differing national systems, in particular the exceptional arrangements still enjoyed by operators on the German market and the protective regimes enjoyed by those trading in Community and traditional ACP bananas on other markets, made it necessary to limit the volume of imports of third-country bananas into the Community. A common organization of the market had to be implemented while Community and ACP bananas were not displaced from the entire common market following the disappearance of the protective barriers enabling them to be disposed of with protection from competition from third-country bananas.
87 Accordingly, the restriction imposed by the Regulation on the freedom of traditional traders in third-country bananas to pursue their trade or business corresponds to objectives of general Community interest and does not impair the very substance of that right.
89 It should be pointed out in this respect that in matters concerning the common agricultural policy the Community legislature has a broad discretion which corresponds to the political responsibilities given to it by Articles 40 and 43 of the Treaty.
90 The Court has held that the lawfulness of a measure adopted in that sphere can be affected only if the measure is manifestly inappropriate having regard to the objective which the competent institution is seeking to pursue. More specifically, where the Community legislature is obliged, in connection with the adoption of rules, to assess their future effects, which cannot be accurately foreseen, its assessment is open to criticism only if it appears manifestly incorrect in the light of the information available to it at the time of the adoption of the rules in question (Wuidart, cited above, paragraph 14, and Case C-331/88 Fedesa and Others [1990] ECR I-4023, paragraph 14).
91 The Court' s review must be limited in that way in particular if, in establishing a common organization of the market, the Council has to reconcile divergent interests and thus select options within the context of the policy choices which are its own responsibility.
94 While other means for achieving the desired result were indeed conceivable, the Court cannot substitute its assessment for that of the Council as to the appropriateness or otherwise of the measures adopted by the Community legislature if those measures have not been proved to be manifestly inappropriate for achieving the objective pursued.
95 The applicant has not shown that the Council adopted measures which were manifestly inappropriate or that it carried out a manifestly erroneous assessment of the information available to it at the time when the Regulation was adopted.
101 It suffices to note that with respect to the establishment of a tariff quota, the import of bananas from ACP States falls under Article 168(2)(a)(ii) of the Lomé Convention, quoted in paragraph 10 above. In accordance with Protocol 5, the Community is obliged to permit the access, free of customs duty, only of the quantities of bananas actually imported "at zero duty" in the best year before 1991 from each ACP State which is a traditional supplier. Moreover, Annexes LXXIV and LXXV relating to that Protocol confirm that the Community' s only obligation is to maintain the advantages, with respect to access of ACP bananas to the Community market, which the ACP States had before the Lomé Convention.
102 In those circumstances the plea in law alleging a breach of Article 168 of the Lomé Convention must be rejected.
Infringement of GATT rules
103 The Federal Republic of Germany submits that compliance with GATT rules is a condition of the lawfulness of Community acts, regardless of any question as to the direct effect of GATT, and that the Regulation infringes certain basic provisions of GATT.
104 The Council, supported in particular by the Commission, argues that in view of its particular nature, GATT cannot be relied on to challenge the lawfulness of a Community act, except in the special case where the Community provisions were adopted to implement obligations entered into within the framework of GATT.
105 In deciding whether the applicant can rely on certain provisions of GATT to challenge the lawfulness of the Regulation, it should be noted that the Court has held that the provisions of GATT have the effect of binding the Community. However, it has also held that in assessing the scope of GATT in the Community legal system, the spirit, the general scheme and the terms of GATT must be considered.
106 It is settled law that GATT, which according to its preamble is based on the principle of negotiations undertaken on the basis of "reciprocal and mutually advantageous arrangements", is characterized by the great flexibility of its provisions, in particular those conferring the possibility of derogation, the measures to be taken when confronted with exceptional difficulties and the settlement of conflicts between the contracting parties.
107 The Court has recognized that those measures include, for the settlement of conflicts, depending on the case, written recommendations or proposals which are to be "given sympathetic consideration", investigations possibly followed by recommendations, consultations between or decisions of the contracting parties, including that of authorizing certain contracting parties to suspend the application to any others of any obligations or concessions under GATT and, finally, in the event of such suspension, the power of the party concerned to withdraw from that agreement.
108 It has noted that where, by reason of an obligation assumed under GATT or of a concession relating to a preference, some producers suffer or are threatened with serious damage, Article XIX gives a contracting party power unilaterally to suspend the obligation and to withdraw or modify the concession, either after consulting the contracting parties jointly and failing agreement between the contracting parties concerned, or even, if the matter is urgent and on a temporary basis, without prior consultation (see Joined Cases 21 to 24/72 International Fruit Company v Produktschap voor Groenten en Fruit [1972] ECR 1219, paragraphs 21, 25 and 26; Case 9/73 Schlueter v Hauptzollamt Loerrach [1973] ECR 1135, paragraph 29; Case 266/81 SIOT v Ministero delle Finanze [1983] ECR 731, paragraph 28; and Joined Cases 267 to 269/91 Amministrazione delle Finanze dello Stato v SPI and SAMI [1983] ECR 801, paragraph 23).
109 Those features of GATT, from which the Court concluded that an individual within the Community cannot invoke it in a court to challenge the lawfulness of a Community act, also preclude the Court from taking provisions of GATT into consideration to assess the lawfulness of a regulation in an action brought by a Member State under the first paragraph of Article 173 of the Treaty.
110 The special features noted above show that the GATT rules are not unconditional and that an obligation to recognize them as rules of international law which are directly applicable in the domestic legal systems of the contracting parties cannot be based on the spirit, general scheme or terms of GATT.
111 In the absence of such an obligation following from GATT itself, it is only if the Community intended to implement a particular obligation entered into within the framework of GATT, or if the Community act expressly refers to specific provisions of GATT, that the Court can review the lawfulness of the Community act in question from the point of view of the GATT rules (see Case 70/87 Fediol v Commission [1989] ECR 1781 and Case C-69/89 Nakajima v Council [1991] ECR I-2069).
112 Accordingly, the Federal Republic of Germany cannot invoke the provisions of GATT to challenge the lawfulness of certain provisions of the Regulation.
Infringement of the Banana Protocol