1 BY AN APPLICATION , REGISTERED AT THE COURT ON 31 JULY 1978 , AND BROUGHT AGAINST THE COUNCIL OF THE EUROPEAN COMMUNITIES , PURSUANT TO ARTICLE 173 OF THE EEC TREATY , THE GOVERNMENT OF THE ITALIAN REPUBLIC REQUESTED THE COURT TO ANNUL THE PROVISIONS RELATING TO A PREMIUM PAYABLE TO POTATO STARCH MANUFACTURERS CONTAINED IN COUNCIL REGULATION ( EEC ) NO 1125/78 OF 22 MAY 1978 AMENDING REGULATION ( EEC ) NO 2727/75 ON THE COMMON ORGANIZATION OF THE MARKET IN CEREALS AND IN COUNCIL REGULATION ( EEC ) NO 1127/78 OF 22 MAY 1978 AMENDING REGULATION ( EEC ) NO 2742/75 ON PRODUCTION REFUNDS IN THE CEREALS AND RICE SECTORS ( OFFICIAL JOURNAL L 142 OF 30 MAY 1978 , PP . 21 AND 24 ).
2 THE COUNCIL , THE DEFENDANT IN THIS ACTION , SUPPORTED BY THE COMMISSION AS INTERVENER , CONTENDS THAT THIS APPLICATION SHOULD BE REJECTED .
3 THE LAST RECITAL IN THE PREAMBLE TO REGULATION NO 1125/78 DRAWS ATTENTION TO ' ' THE CONSTRAINTS IMPOSED ON THE POTATO STARCH INDUSTRY ' ' WHICH ' ' COULD LEAD TO A DISTURBANCE OF THE BALANCE BETWEEN THE DIFFERENT STARCH INDUSTRIES ' ' AND ARTICLE 2 THEREOF PROVIDES FOR THE INSERTION IN THE BASIC REGULATION FOR THE MARKET IN CEREALS ( REGULATION NO 2727/75 ) OF A PROVISION AUTHORIZING THE PAYMENT OF A PREMIUM TO POTATO STARCH MANUFACTURERS . PURSUANT TO THIS PROVISION ARTICLE 3 OF REGULATION NO 1127/78 PROVIDES THAT ' ' MEMBER STATES SHALL GRANT A PREMIUM OF 10 UNITS OF ACCOUNT PER TONNE OF POTATO STARCH PAYABLE TO THE STARCH MANUFACTURER ' ' .
4 THE PROVISIONS AT ISSUE FORM PART OF THE GENERAL PATTERN OF COMMUNITY RULES RELATING TO STARCH PRODUCTS THE MAIN PURPOSE OF WHICH IS TO ENABLE PRODUCTS BASED ON RAW MATERIALS OF AGRICULTURAL ORIGIN TO STAND UP TO COMPETITION FROM SYNTHETIC PRODUCTS . ONE OF THE WAYS OF ATTAINING THAT END IS THE GRANTING OF PRODUCTION REFUNDS . THE RATE OF THESE REFUNDS IS FIXED IN SUCH A WAY THAT THE BALANCE BETWEEN COMPETING PRODUCTS SUCH AS MAIZE STARCH AND POTATO STARCH IS NOT DISTURBED . THE BALANCE WHICH HAS EXISTED TRADITIONALLY BETWEEN THESE TWO PRODUCTS PRIMARILY DUE TO THE FACT THAT , ALTHOUGH THE RAW MATERIAL OF MAIZE STARCH IS MORE EXPENSIVE THAN THAT OF POTATO STARCH , AND ALTHOUGH THE RESPECTIVE PRODUCTION COSTS ARE COMPARABLE , THE VALUE OF MAIZE STARCH BY-PRODUCTS IS GREATER THAN THAT OF POTATO STARCH BY-PRODUCTS WITH THE RESULT THAT THE COST PRICE OF THE TWO PRODUCTS DOES NOT DIFFER APPRECIABLY . THE CAUSE OF ACTION IS THE INTRODUCTION BY THE DISPUTED REGULATIONS OF A PREMIUM PAYABLE ONLY IN RESPECT OF POTATO STARCH WHILST THE SYSTEM OF COMPARABLE REFUNDS IS RETAINED FOR THE BENEFIT OF BOTH PRODUCTS . ADMISSIBILITY
5 THE COUNCIL HAS INVOKED THE PLEA THAT THE APPLICATION IS INADMISSIBLE BY REASON OF THE AFFIRMATIVE UNQUALIFIED VOTE CAST BY ITALY WHEN THE REGULATIONS IN QUESTION WERE ADOPTED BY THE COUNCIL AND ALSO OF THE VOTE CAST BY THE ITALIAN REPRESENTATIVE ON THE MANAGEMENT COMMITTEE FOR CEREALS WHEN THE IMPLEMENTING MEASURES , WHICH IN THE MEANTIME HAVE BEEN BROUGHT INTO FORCE BY COMMISSION REGULATION ( EEC ) NO 1809/78 OF 28 JULY 1978 LAYING DOWN RULES FOR THE PAYMENT OF A PREMIUM TO PRODUCERS OF POTATO STARCH , WERE CONSIDERED ( OFFICIAL JOURNAL L 205 OF 29 JULY 1978 , P . 69 ).
6 THIS PLEA OF INADMISSIBILITY CANNOT BE UPHELD . THE FIRST PARAGRAPH OF ARTICLE 173 OF THE TREATY CONFERS ON EVERY MEMBER STATE THE RIGHT TO CHALLENGE , BY AN APPLICATION FOR ANNULMENT , THE LEGALITY OF EVERY COUNCIL REGULATION , WITHOUT THE EXERCISE OF THIS RIGHT BEING CONDITIONAL UPON THE POSITIONS TAKEN UP BY THE REPRESENTATIVES OF THE MEMBER STATES OF WHICH THE COUNCIL IS COMPOSED WHEN THE REGULATION IN QUESTION WAS ADOPTED . SUBSTANCE THE STATEMENTS OF THE REASONS UPON WHICH THE REGULATIONS AT ISSUE ARE BASED
7 THE ITALIAN GOVERNMENT ' S APPLICATION IS BASED ON A NUMBER OF COMPLAINTS THE FIRST OF THESE BEING THAT THERE IS A FAILURE TO GIVE AN ADEQUATE STATEMENT OF REASONS . AS FAR AS CONCERNS REGULATION NO 1125/78 THAT GOVERNMENT SUBMITS , IN THE FIRST PLACE , THAT THE STATEMENT OF REASONS UPON WHICH IT IS BASED IS INADEQUATE BECAUSE IT IS IMPOSSIBLE TO FIND OUT FROM IT WHAT KIND OF DIFFICULTIES THE POTATO STARCH INDUSTRY IS EXPERIENCING AND , IN THE SECOND PLACE , IT IS INCONSISTENT IN THAT IT SHOWS , ON THE ONE HAND , THAT THE SYSTEM OF REFUNDS MUST BE APPLIED EQUALLY TO COMPETING PRODUCTS WHILST , ON THE OTHER HAND , IT STATES THAT PREFERENTIAL TREATMENT OF POTATO STARCH BY THE GRANTING OF A PREMIUM IS NECESSARY . AS FAR AS CONCERNS REGULATION NO 1127/78 THE GOVERNMENT SUBMITS THAT THE RECITALS IN THE PREAMBLE THERETO MERELY REFERS TO THE VALUE OF THE BY-PRODUCTS OBTAINED FROM THE MANUFACTURE OF MAIZE STARCH WITHOUT GIVING PARTICULARS EITHER OF THEIR VALUE OR OF THEIR PRODUCTION COSTS WHICH , HOWEVER , HAVE NOT REMAINED THE SAME .
8 ON THIS POINT , AS THE COURT HAS REPEATEDLY HELD IN ITS DECIDED CASES , IT SHOULD BE STRESSED THAT , AS FAR AS CONCERNS GENERAL ACTS , ESPECIALLY REGULATIONS , THE REQUIREMENTS OF ARTICLE 190 OF THE TREATY ARE SATISFIED IF THE STATEMENT OF REASONS GIVEN EXPLAINS IN ESSENCE THE MEASURES TAKEN BY THE INSTITUTIONS AND THAT A SPECIFIC STATEMENT OF REASONS IN SUPPORT OF ALL THE DETAILS WHICH MIGHT BE CONTAINED IN SUCH A MEASURE CANNOT BE REQUIRED , PROVIDED SUCH DETAILS FALL WITHIN THE GENERAL SCHEME OF THE MEASURES AS A WHOLE .
9 IN THE CASE IN POINT THE STATEMENTS OF THE REASONS UPON WHICH THE REGULATIONS IN QUESTION ARE BASED MEET THESE REQUIREMENTS . THE LAST RECITAL IN THE PREAMBLE TO REGULATION NO 1125/78 WHICH CONFERS THE POWER TO INTRODUCE THE PREMIUM AT ISSUE STATES ' ' . . . THE CONSTRAINTS IMPOSED ON THE POTATO STARCH INDUSTRY COULD LEAD TO A DISTURBANCE OF THE BALANCE BETWEEN THE DIFFERENT STARCH INDUSTRIES ' ' . THE CONSEQUENCE OF THIS SITUATION AS THE RECITAL GOES ON TO STATE IS THAT ' ' IT MAY ALSO PROVE NECESSARY TO PROVIDE FOR A PREMIUM TO BE PAID TO POTATO STARCH MANUFACTURERS ' ' . THESE REASONS ARE NOT AT ALL INCONSISTENT WITH THE SECOND RECITAL WHICH STATES THAT THE PRINCIPLE OF EQUALITY IS TO BE APPLIED TO PRODUCTS HAVING THE SAME OUTLETS , ESPECIALLY IF ACCOUNT IS TAKEN OF THE FACT THAT THE ABSENCE OF A COMMON ORGANIZATION OF THE MARKET IN POTATOES MAY GIVE RISE IN THE CASE OF THIS PRODUCT TO A SPECIAL SITUATION REQUIRING SPECIFIC MEASURES WITH A VIEW TO ESTABLISHING ACTUAL EQUALITY WITH THE PRODUCTS WITHIN THE SCOPE OF THE COMMON ORGANIZATION OF THE MARKET IN CEREALS .
10 THE STATEMENT OF THE REASONS UPON WHICH REGULATION NO 1127/78 , WHICH IMPLEMENTED THE GRANTING OF THE PREMIUM AND FIXED THE AMOUNT THEREOF , IS BASED ALSO MEETS THE REQUIREMENTS OF ARTICLE 190 OF THE TREATY . THE THIRD RECITAL IN THE PREAMBLE IN FACT INDICATES THAT THE PAYMENT OF A PREMIUM TO POTATO STARCH MANUFACTURERS IS NECESSARY IN ORDER TO MAINTAIN A BALANCED RELATIONSHIP BETWEEN POTATO STARCH AND MAIZE STARCH PRICES , TAKING INTO ACCOUNT ' ' THE INCREASING ADVANTAGE ENJOYED BY THE MAIZE STARCH INDUSTRY , PARTICULARLY BECAUSE OF THE BY-PRODUCTS OBTAINED FROM SUCH MANUFACTURE ' ' . SINCE ATTENTION HAS BEEN DRAWN TO THE DIFFERENCE BETWEEN THE TWO INDUSTRIAL SECTORS THERE IS NO NEED FOR THE STATEMENT OF REASONS TO GIVE DETAILS CONCERNING THIS DIFFERENCE . THE EVALUATION OF THE ECONOMIC FACTS
11 ANOTHER COMPLAINT , WHICH RELATES IN PARTICULAR TO REGULATION NO 1127/78 , IS BASED ON THE MANIFEST ERROR WHICH THE COUNCIL IS SAID TO HAVE MADE WHEN IT EVALUATED CERTAIN ECONOMIC FACTORS UPON WHICH ITS INTRODUCTION OF THE PREMIUM AT ISSUE WAS FOUNDED .
12 THE APPLICANT GOVERNMENT SUBMITS IN THIS CONNEXION THAT THE BALANCE BETWEEN THE COST PRICE OF MAIZE STARCH AND POTATO STARCH WHEN PRODUCTION REFUNDS WERE INTRODUCED IN 1967 NO LONGER EXISTED IN 1978 , THE SPECIAL REASON FOR THIS BEING THE INCREASE IN THE COST OF PROCESSING MAIZE INTO STARCH . THUS THAT GOVERNMENT MAINTAINS THAT THE COSTS OF THIS ITALIAN MAIZE STARCH MANUFACTURING INDUSTRY PUT AT 58 UNITS OF ACCOUNT PER TONNE IN 1967 HAD GONE UP IN 1978 TO 86 UNITS OF ACCOUNT AND ESTIMATES THAT THEY ARE 77 UNITS OF ACCOUNT PER TONNE ON AVERAGE THROUGHOUT THE COMMUNITY . THE COUNCIL MAINTAINS FOR ITS PART THAT MAIZE STARCH MANUFACTURING COSTS WERE ONLY 39 UNITS OF ACCOUNT PER TONNE IN 1967 AND THAT THEY WENT UP IN 1978 TO 49 UNITS OF ACCOUNT PER TONNE .
13 THE ITALIAN GOVERNMENT ALSO SUBMITS THAT , WHEN THE COUNCIL TOOK INTO CONSIDERATION THE VALUE OF THE MAIZE STARCH BY-PRODUCTS AND CALCULATED THAT VALUE FOR 1978 AT 79 UNITS OF ACCOUNT PER TONNE , IT ONLY TOOK ACCOUNT OF THE PROCEEDS OF SALE OF THE BY-PRODUCTS WITHOUT DEDUCTING THE PRODUCTION COSTS ATTRIBUTABLE TO THE LATTER , AND IN SO DOING OVERESTIMATED THE DIFFERENCE BETWEEN THEIR VALUE AND THAT OF POTATO STARCH BY-PRODUCTS , EVALUATED AT 22 UNITS OF ACCOUNT . THE COUNCIL ' S ANSWER TO THIS OBJECTION IS THAT , ALTHOUGH THE PRODUCTION COSTS ATTRIBUTABLE TO THE BY-PRODUCTS HAVE NOT BEEN EXPRESSLY SET OUT IN THE CALCULATIONS , THE FIGURES WHICH ARE GIVEN ARE BASED ON THE FINDING ARRIVED AT BY IMPLICATION THAT THE TREND OF PRODUCTION COSTS WAS COMPARABLE AND THAT THEY REMAIN AT MORE OR LESS THE SAME LEVEL .
14 IN ORDER TO WEIGH THE ARGUMENTS PUT FORWARD BY THE PARTIES IT SHOULD IN THE FIRST INSTANCE BE PLACED ON RECORD THAT IT IS AN IMPLICATION OF THE OBJECTIVE OF THE COMMUNTIY REGULATION AT ISSUE , WHICH IS TO ENSURE THAT THE ORGANIZATION OF THE MARKET MAKES PROPER ALLOWANCE FOR THE BALANCE BETWEEN THE COMPETING PRODUCTS , THAT THE COUNCIL HAS TO ASSESS A COMPLEX ECONOMIC SITUATION . ALTHOUGH SOME OF THE CONSTITUENT ELEMENTS OF THIS SITUATION MAY BE ASCERTAINED IN ACCORDANCE WITH OBJECTIVE CRITERIA , SUCH , FOR EXAMPLE , AS THE PRICES OF RAW MATERIALS WHICH ARE DETERMINED BY THE ACTUAL ORGANIZATION OF THE MARKET IN CEREALS , THERE ARE OTHERS WHICH ARE MORE DIFFICULT TO APPREHEND WITH ANY ACCURACY . THIS APPLIES ESPECIALLY TO PRODUCTION COSTS IN AN INDUSTRY SUCH AS THE ONE IN THIS CASE , THE DISTINGUISHING FEATURE OF WHICH IS THE EXISTENCE OF A LARGE NUMBER OF UNDERTAKINGS OF DIFFERENT SIZE AND ECONOMIC STRUCTURE AND SITUATED IN DIFFERENT MEMBER STATES . IN SUCH CIRCUMSTANCES THE DISCRETION WHICH THE COUNCIL HAS WHEN IT ASSESSES A COMPLEX ECONOMIC SITUATION IS NOT ONLY EXERCISABLE IN RELATION TO THE NATURE AND SCOPE OF THE PROVISIONS WHICH ARE TO BE ADOPTED BUT ALSO , TO A CERTAIN EXTENT , TO THE FINDINGS AS TO THE BASIC FACTS , ESPECIALLY IN THIS SENSE THAT THE COUNCIL IS FREE TO BASE ITS ASSESSMENT , IF NECESSARY , ON FINDINGS OF A GENERAL NATURE .
15 TO PROVE THAT THE COUNCIL HAS MADE A SERIOUS MISTAKE IN THE EXERCISE OF THE DISCRETION GIVEN TO IT WOULD REQUIRE EVIDENCE MORE DEFINITE AND LESS DISPUTABLE THAN THAT ADDUCED BY THE ITALIAN GOVERNMENT DURING THE PROCEEDINGS . IN THIS PARTICULAR CASE THE BURDEN OF PROOF LIES ALL THE MORE ON THE APPLICANT GOVERNMENT AS IT HAD THE OPPORTUNITY THROUGH ITS REPRESENTATIVES TAKING PART IN THE WORK OF THE COUNCIL OF PARTICIPATING IN THE ASSESSMENT OF THE ECONOMIC SITUATION WHICH IS THE UNDERLYING REASON WHY THE DISPUTED REGULATIONS WERE ADOPTED .
16 IT SHOULD BE ADDED THAT THE AMOUNT OF THE PREMIUM , COMPARED WITH ALL THE FACTORS WHICH MAKE UP THE COST PRICE OF THE PRODUCTS AT ISSUE , DOES NOT SEEM LIKELY TO LEAD TO A FUNDAMENTAL CHANGE IN CONDITIONS OF COMPETITION BETWEEN MAIZE STARCH AND POTATO STARCH . IN THIS CONNEXION IT MUST BE POINTED OUT THAT THE APPLICANT GOVERNMENT , WHICH FORECAST SERIOUS AND IRREPARABLE DAMAGE TO THE MAIZE STARCH INDUSTRY AT THE TIME WHEN , AT THE COMMENCEMENT OF THE PROCEEDINGS , IT REQUESTED THE COURT TO SUSPEND THE OPERATION OF THE MEASURE AT ISSUE ( SEE ORDER OF 28 AUGUST 1978 ( 1978 ) ECR 1945 ) HAS NOT SINCE BEEN ABLE TO FURNISH ANY PROOF WHATEVER IN SUPPORT OF ITS ALLEGATIONS .
17 FOR THESE REASONS IT MUST BE CONCLUDED THAT THE COMPLAINT BASED ON A MANIFEST ERROR IN ASSESSING THE ECONOMIC FACTORS CANNOT BE UPHELD . COMPLIANCE WITH ARTICLES 39 AND 40 OF THE TREATY
18 THE ITALIAN GOVERNMENT ALSO COMPLAINS THAT THE REGULATIONS AT ISSUE DO NOT SEEK TO ATTAIN THE OBJECTIVES OF ARTICLE 39 OF THE TREATY IN A CORRECT MANNER AND AMOUNT TO DISCRIMINATION INFRINGING THE SECOND SUBPARAGRAPH OF ARTICLE 40 ( 3 ) OF THE TREATY . THE ARGUMENTS PUT FORWARD IN SUPPORT OF THESE TWO COMPLAINTS ARE , IN SUBSTANCE , SO SIMILAR THAT IT IS APPROPRIATE TO CONSIDER THEM TOGETHER . IN EFFECT THESE COMPLAINTS ARE THAT THE PREMIUM AT ISSUE FAVOURS ONE BRANCH OF INDUSTRY , THAT OF POTATO STARCH , TO THE DETRIMENT OF THE MAIZE STARCH INDUSTRY .
19 IT IS AN ESTABLISHED FACT THAT POTATO STARCH AS WELL AS MAIZE STARCH , BEING PRODUCTS PROCESSED FROM AGRICULTURAL PRODUCTS , ARE COVERED BY THE AGRICULTURAL POLICY . THE PURPOSE OF THE PREMIUM PAYABLE TO THE PRODUCERS OF ONE OF THESE TWO PRODUCTS , POTATO STARCH , IS TO MAINTAIN THE PROFITABILITY OF THIS BRANCH OF INDUSTRY AND THUS , INDIRECTLY , TO ENSURE AN OUTLET FOR AN AGRICULTURAL PRODUCT , THE IMPORTANCE OF WHICH FOR THE AGRICULTURAL ECONOMY IN CERTAIN REGIONS OF THE COMMUNITY IS EVIDENT . THERE IS THEREFORE NO DOUBT WHATEVER THAT THE MEASURE AT ISSUE IS WITHIN THE AMBIT OF THE OBJECTIVES OF THE COMMON AGRICULTURAL POLICY AS SUCH OBJECTIVES ARE DEFINED IN ARTICLE 39 OF THE TREATY .
20 ALTHOUGH IT IS TRUE THAT THE PREMIUM AT ISSUE HAS BEEN GRANTED TO ONE BRANCH OF INDUSTRY TO THE EXCLUSION OF A COMPETING BRANCH THIS DIFFERENCE NEVERTHELESS DOES NOT AMOUNT TO DISCRIMINATION WITHIN THE MEANING OF THE TREATY . THE PREMIUM HAS BEEN INTRODUCED FOR THE PURPOSE OF OBVIATING THE SPECIAL DIFFICULTIES WHICH THE COUNCIL HAS FOUND TO EXIST IN THE POTATO STARCH SECTOR FOLLOWING THE TREND , UNFAVOURABLE TO THAT SECTOR , OF CERTAIN ECONOMIC FACTORS , ESPECIALLY OF THE VALUE OF THE BY-PRODUCTS OF BOTH OF THE PRINCIPAL PRODUCTS . THE DIFFERENCE CANNOT BE REGARDED AS DISCRIMINATORY .
21 IT FOLLOWS FROM THE FOREGOING THAT THE COMPLAINTS BASED ON FAILURE TO COMPLY WITH ARTICLES 39 AND 40 OF THE TREATY CANNOT BE UPHELD . THE PRINCIPLE OF PROPORTIONALITY
22 FINALLY THE ITALIAN GOVERNMENT COMPLAINS THAT REGULATION NO 1127/78 IS IN BREACH OF THE PRINCIPLE OF PROPORTIONALITY WHICH REQUIRES THE IMPOSITION OF A BURDEN TO BE PROPORTIONATE TO THE OBJECTIVE TO BE ATTAINED . IT SUBMITS ON THIS POINT THAT THE OBJECTIVE SOUGHT TO BE ATTAINED BY THE INTRODUCTION OF THE PREMIUM AT ISSUE HAS BEEN TO GIVE PREFERENCE TO POTATO GROWERS . THIS OBJECTIVE , IT CLAIMS , COULD HAVE BEEN ATTAINED BY MEANS OTHER THAN THE PAYMENT OF A PREMIUM TO THE PRODUCERS OF POTATO STARCH WHICH HAS IN FACT IMPOSED ON THE MAIZE STARCH INDUSTRY AN ADDITIONAL BURDEN BECAUSE THE TWO INDUSTRIES ARE IN COMPETITION .
23 ON THIS ISSUE IT MUST BE BORNE IN MIND THAT THE AIM OF THE PREMIUM PAYABLE TO PRODUCERS OF POTATO STARCH WAS NOT TO ENSURE THAT THE GROWERS RECEIVED A BETTER INCOME BUT TO MAINTAIN THE PROFITABILITY OF THE POTATO STARCH INDUSTRY AND IN THIS WAY TO PROTECT THE TRADITIONAL OPPORTUNITIES FOR MARKETING POTATO PRODUCTS IN SO FAR AS THESE PRODUCTS DO NOT FIND ANY OTHER OUTLETS . THE INTRODUCTION OF THE PREMIUM AT ISSUE CANNOT IN THE PREVAILING ECONOMIC CONDITIONS BE REGARDED AS DISPROPORTIONATE TO THE OBJECTIVE SOUGHT TO BE ATTAINED AND THE COMPLAINT CANNOT THEREFORE BE UPHELD .
24 AS NONE OF THE COMPLAINTS MADE BY THE APPLICANT GOVERNMENT HAS BEEN UPHELD THE APPLICATION MUST BE DISMISSED .