1BY AN ORDER OF 7 JULY 1978 WHICH WAS RECEIVED AT THE COURT ON 26 JULY 1978 , THE FINANZGERICHT DUSSELDORF REFERRED A QUESTION TO THE COURT OF JUSTICE FOR A PRELIMINARY RULING UNDER ARTICLE 177 OF THE EEC TREATY ON THE VALIDITY OF COMMISSION REGULATION NO 800/77 OF 20 APRIL 1977 AMENDING , AS REGARDS PRODUCTS WHICH ARE SUBJECT TO MONETARY COMPENSATORY AMOUNTS , REGULATION NO 572/76 FIXING THE MONETARY COMPENSATORY AMOUNTS ( OFFICIAL JOURNAL 1977 , L 97 , P . 18 ).
2THIS QUESTION WAS RAISED IN THE CONTEXT OF A DISPUTE OVER THE CHARGING OF MONETARY COMPENSATORY AMOUNTS OF DM 66.50 IN RESPECT OF THE IMPORTATION INTO THE FEDERAL REPUBLIC OF GERMANY ON 1 AUGUST 1977 OF COMPRESSED TABLETS , JELLY CONFECTIONERY AND GUMS COMING UNDER TARIFF HEADING 17.04 D OF THE COMMON CUSTOMS TARIFF , WHICH HAD BEEN BOUGHT IN BELGIUM AND ITALY BY TRAWIGO GMBH & CO . KG , THE PLAINTIFF IN THE MAIN ACTION , AT A PRICE OF DM 11 351 IN ALL . THE PLAINTIFF ASKED THE FINANZGERICHT DUSSELDORF TO ANNUL THE ASSESSMENT TO THE SAID MONETARY COMPENSATORY AMOUNTS ISSUED BY THE COMPETENT HAUPTZOLLAMT , THE DEFENDANT IN THE MAIN ACTION .
3THE DISPUTE CONCERNS THE APPLICATION OF THE MONETARY COMPENSATORY AMOUNTS SYSTEM TO CERTAIN PRODUCTS WHICH ARE NOT COVERED BY ANNEX II TO THE TREATY AND ARE THE SUBJECT OF A SPECIFIC ARRANGEMENT UNDER ARTICLE 235 OF THE TREATY ACCORDING TO THE TERMS OF ARTICLE 1 ( 2 ) ( B ) OF REGULATION NO 974/71 OF THE COUNCIL OF 12 MAY 1971 ON CERTAIN MEASURES OF CONJUNCTURAL POLICY TO BE TAKEN IN AGRICULTURE FOLLOWING THE TEMPORARY WIDENING OF THE MARGINS OF FLUCTUATION FOR THE CURRENCIES OF CERTAIN MEMBER STATES ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1971 ( I ), P . 257 ). THE SAID PRODUCTS , TO WHICH REGULATION NO 800/77 RELATES , COME UNDER TARIFF HEADINGS 17.04 D ( SUGAR CONFECTIONERY NOT CONTAINING COCOA , OTHER THAN LIQUORICE EXTRACT , CHEWING-GUM AND WHITE CHOCOLATE ), 18.06 B ( ICE-CREAM ( NOT INCLUDING ICE-CREAM POWDER ) AND OTHER ICES CONTAINING COCOA ), 18.06 C ( CHOCOLATE AND SUGAR CONFECTIONERY CONTAINING COCOA ), 19.08 B ( PASTRY , BISCUITS , CAKES AND OTHER FINE BAKERS ' WARES OTHER THAN GINGERBREAD AND THE LIKE ) AND 21.07 C ( ICE-CREAM ( NOT INCLUDING ICE-CREAM POWDER ) AND OTHER ICES NOT CONTAINING COCOA ). IT EMERGES FROM THE SECOND AND THIRD RECITALS IN THE PREAMBLE TO REGULATION NO 800/77 THAT , SINCE ALL THE BASIC AGRICULTURAL PRODUCTS FROM WHICH THOSE GOODS ARE DERIVED WERE SUBJECT TO MONETARY COMPENSATORY AMOUNTS OF A HIGH LEVEL , ' ' THE DIFFERENCE IN PRICES OF THE BASIC PRODUCTS HAD BECOME SO MARKED AS TO HAVE A CONSIDERABLE EFFECT ON THE CONDITIONS OF COMPETITION OF THE PROCESSED PRODUCTS , HAVING REGARD TO THE CHARACTERISTICS OF THE MARKET IN CERTAIN SENSITIVE PRODUCTS ' ' .
4THE ADOPTION OF THAT REGULATION , WHICH APPLIED WITH EFFECT FROM 23 MAY 1977 , HAD BEEN PRECEDED BY THE COMMISSION DECISION OF 23 MARCH 1977 AUTHORIZING IRELAND TO TAKE PROTECTIVE MEASURES IN RESPECT OF CERTAIN PROCESSED AGRICULTURAL PRODUCTS UNDER ARTICLE 135 OF THE ACT OF ACCESSION AND ALLOWING THAT MEMBER STATE UNTIL 31 DECEMBER 1977 TO LEVY A CHARGE ON IMPORTS FROM THE UNITED KINGDOM AND GRANT A PAYMENT ON EXPORTS TO THE UNITED KINGDOM OF THE PROCESSED AGRICULTURAL PRODUCTS COMING UNDER THE ABOVE-MENTIONED TARIFF HEADINGS ( OFFICIAL JOURNAL 1977 , L 97 , P . 29 ). THE RECITALS IN THE PREAMBLE TO THIS DECISION STATED THAT : ' ' . . . THE COMPENSATORY AMOUNTS CHARGED OR GRANTED . . . ( ON THE ) BASIC PRODUCTS , WOULD AMOUNT TO 34.7% IN THE CASE OF THE UNITED KINGDOM AND TO 10.4% IN THE CASE OF IRELAND ; . . . THIS SITUATION , ENTAILING A RELATIVE DISADVANTAGE TO THE MANUFACTURERS . . . IN IRELAND ON THE COST OF THE BASIC PRODUCTS OF 24.3% , MAY LEAD TO DISTORTION IN THE TERMS OF COMPETITION IN TRADE IN THE PROCESSED AGRICULTURAL PRODUCTS REFERRED TO IN THE IRISH APPLICATION BETWEEN THE MEMBER STATES CONCERNED ; . . . THIS SITUATION , IN ITS PRESENT ACUTE FORM SINCE NOVEMBER 1976 , HAS GIVEN RISE TO SERIOUS DIFFICULTIES FOR THE SECTORS CONCERNED IN IRELAND . . . ' ' THE MONETARY COMPENSATORY AMOUNTS THUS INTRODUCED BY THESE BILATERAL ARRANGEMENTS BETWEEN THE UNITED KINGDOM AND IRELAND WERE ALTERED BY THE COMMISSION DECISION OF 4 MAY 1977 ( OFFICIAL JOURNAL 1977 , L 123 , P . 18 ), ACCORDING TO WHICH THIS SECOND DECISION AS WELL AS THE PRECEDING ONE CEASED TO APPLY ON THE DAY ON WHICH REGULATION NO 800/77 TOOK EFFECT .
5THE QUESTION ASKED BY THE FINANZGERICHT DUSSELDORF IS THE FOLLOWING : ' ' IS COMMISSION REGULATION ( EEC ) NO 800/77 OF 20 APRIL 1977 INVALID IN SO FAR AS IT PROVIDES THAT MONETARY COMPENSATORY AMOUNTS ARE TO BE CHARGED ON IMPORTS AND GRANTED ON EXPORTS OF GOODS COMING WITHIN TARIFF HEADING 17.04 D ( CODE NO 1704806 AND 1704602)? ' '
6THE PLAINTIFF CHALLENGES THE VALIDITY OF THE APPLICATION , PURSUANT TO THE PROVISIONS OF REGULATION NO 974/71 , OF MONETARY COMPENSATORY AMOUNTS TO PROCESSED PRODUCTS WHICH ARE NOT AGRICULTURAL PRODUCTS WITHIN THE MEANING OF ANNEX II TO THE TREATY BUT ARE DERIVED FROM AGRICULTURAL PRODUCTS .
7REGULATION NO 974/71 OF THE COUNCIL OF 12 MAY 1971 , AS AMENDED BY REGULATION NO 2746/72 OF THE COUNCIL , IS BASED UPON ' ' THE TREATY ESTABLISHING THE EUROPEAN ECONOMIC COMMUNITY , AND IN PARTICULAR ARTICLES 28 , 43 AND 235 THEREOF ' ' . ACCORDING TO ARTICLE 1 ( 2 ) OF THAT REGULATION : ' ' PARAGRAPH 1 SHALL APPLY : ( A ) TO PRODUCTS COVERED BY INTERVENTION ARRANGEMENTS UNDER THE COMMON ORGANIZATION OF AGRICULTURAL MARKETS ; ( B)TO PRODUCTS WHOSE PRICE DEPENDS ON THE PRICE OF THE PRODUCTS REFERRED TO UNDER ( A ) AND WHICH ARE GOVERNED BY THE COMMON ORGANIZATION OF MARKET OR ARE THE SUBJECT OF A SPECIFIC ARRANGEMENT UNDER ARTICLE 235 OF THE TREATY . ' ' ARTICLE 235 OF THE TREATY PROVIDES : ' ' IF ACTION BY THE COMMUNITY SHOULD PROVE NECESSARY TO ATTAIN , IN THE COURSE OF THE OPERATION OF THE COMMON MARKET , ONE OF THE OBJECTIVES OF THE COMMUNITY AND THIS TREATY HAS NOT PROVIDED THE NECESSARY POWERS , THE COUNCIL SHALL , ACTING UNANIMOUSLY ON A PROPOSAL FROM THE COMMISSION AND AFTER CONSULTING THE ASSEMBLY , TAKE THE APPROPRIATE MEASURES . ' ' BY VIRTUE OF THIS PROVISION ON 28 MAY 1969 THE COUNCIL , ACTING ON A PROPOSAL FROM THE COMMISSION AND AFTER CONSULTING THE ASSEMBLY , ADOPTED REGULATION NO 1059/69 LAYING DOWN THE TRADE ARRANGEMENTS APPLICABLE TO CERTAIN GOODS RESULTING FROM THE PROCESSING OF AGRICULTURAL PRODUCTS . AMONG THE GOODS SUBJECT TO THE PROVISIONS OF THIS REGULATION ARE THOSE COMING UNDER TARIFF SUBHEADING 17.04 D ( SUGAR CONFECTIONERY NOT CONTAINING COCOA , OTHER THAN LIQUORICE EXTRACT , CHEWING-GUM AND WHITE CHOCOLATE ). CONSEQUENTLY , THE PRODUCTS TO WHICH THE QUESTION REFERS ARE THE SUBJECT OF A SPECIFIC ARRANGEMENT UNDER ARTICLE 235 OF THE TREATY , AND COMPENSATORY AMOUNTS CAN VALIDLY BE FIXED FOR THOSE PRODUCTS .
8THE PLAINTIFF AND THE ITALIAN GOVERNMENT SUBMIT THAT BY ADOPTING REGULATION NO 800/77 , THE COMMISSION INFRINGED THE PROVISIONS OF ARTICLE 1 ( 3 ) OF REGULATION NO 974/71 , ACCORDING TO WHICH ' ' PARAGRAPH 1 SHALL APPLY ONLY WHERE APPLICATION OF THE MONETARY MEASURES REFERRED TO IN THAT PARAGRAPH WOULD LEAD TO DISTURBANCES IN TRADE IN AGRICULTURAL PRODUCTS . ' ' THEY SUBMIT THAT BY VIRTUE OF THAT PROVISION COMPENSATORY AMOUNTS ON PRODUCTS NOT COVERED BY ANNEX II TO THE TREATY AND FORMING THE SUBJECT OF A SPECIFIC ARRANGEMENT UNDER ARTICLE 235 OF THE TREATY COULD NOT HAVE BEEN INTRODUCED EXCEPT IN ORDER TO AVOID THE RISK OF DISTURBANCES IN TRADE IN THE BASIC AGRICULTURAL PRODUCTS ( SUGAR , CEREALS AND SO ON ) ON WHICH THE PROCESSED PRODUCTS , NAMELY ICE-CREAM , CHOCOLATE , BISCUITS AND SO ON , DEPEND . THEY SUBMIT THAT , ACCORDING TO THE RECITALS IN THE PREAMBLE TO REGULATION NO 800/77 , THE COMMISSION ASSESSED NOT THE RISK OF DISTURBANCES IN TRADE IN AGRICULTURAL PRODUCTS BUT THE RISK OF DISTORTIONS IN COMPETITION IN THE PRODUCTS AT ISSUE . THEY ALSO SUBMIT THAT THE STATEMENT OF THE REASONS ON WHICH REGULATION NO 800/77 WAS BASED IS DEFECTIVE INASMUCH AS IT FAILS TO TAKE ACCOUNT OF THE RISK OF DISTURBANCES IN TRADE IN AGRICULTURAL PRODUCTS AND IN THAT IT CONFINES ITSELF TO ESTABLISHING THE RISK OF DISTURBANCES IN THE CONDITIONS OF COMPETITION IN TRADE IN THE PROCESSED PRODUCTS .
9IT IS TRUE THAT IN ORDER TO JUSTIFY REGULATION NO 800/77 THE COMMISSION STATED THAT ' ' IN THE CASE OF THE PROCESSED PRODUCTS NOT SUBJECT TO MONETARY COMPENSATORY AMOUNTS , THE DIFFERENCE IN PRICES OF THE BASIC PRODUCTS HAS BECOME SO MARKED AS TO HAVE A CONSIDERABLE EFFECT ON THE CONDITIONS OF COMPETITION OF THE PROCESSED PRODUCTS . . . ' ' .
10THE WORDING OF ARTICLE 1 ( 3 ) OF REGULATION NO 974/71 AS AMENDED BY REGULATION NO 2746/72 OF THE COUNCIL OF 19 DECEMBER 1972 ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1972 ( 28 - 30 DECEMBER ), P . 64 ) REQUIRES THAT FOR THE APPLICATION OF COMPENSATORY AMOUNTS TO BASIC AGRICULTURAL PRODUCTS , THE MONETARY MEASURES REFERRED TO IN PARAGRAPH 1 ( NAMELY THE FLUCTUATION OF THE EXCHANGE RATE OF A MEMBER STATE ' S CURRENCY ) SHOULD LEAD TO DISTURBANCES IN TRADE IN AGRICULTURAL PRODUCTS . AS REGARDS THE PROCESSED PRODUCT , IT EMERGES FROM THE PROVISIONS OF ARTICLE 2 ( 2 ) OF REGULATION NO 974/71 THAT THE COMPENSATORY AMOUNTS APPLICABLE SHALL BE EQUAL TO THE INCIDENCE , ON THE PRICE OF THE PRODUCT CONCERNED , OF THE APPLICATION OF THE COMPENSATORY AMOUNT TO THE PRICE OF THE BASIC PRODUCT ON WHICH IT DEPENDS . IT FOLLOWS THAT IN ORDER TO JUSTIFY THE APPLICATION OF COMPENSATORY AMOUNTS TO PROCESSED PRODUCTS , IT IS SUFFICIENT FOR THE COMPENSATORY AMOUNTS APPLICABLE TO THE BASIC PRODUCTS TO HAVE A CONSIDERABLE INCIDENCE ON THE PRICE OF THE PROCESSED PRODUCTS . AS REGARDS THE BASIC AGRICULTURAL PRODUCTS FROM WHICH THE PROCESSED PRODUCTS REFERRED TO IN REGULATION NO 800/77 ARE DERIVED , THE RISK OF DISTURBANCES HAD BEEN ESTABLISHED AT THE TIME WHEN THE MONETARY COMPENSATORY AMOUNTS WERE APPLIED TO THOSE BASIC PRODUCTS . HENCE THE COMMISSION WAS RIGHT IN CONFINING ITSELF TO ESTABLISHING THAT THE INCIDENCE ON THE PRICES OF THE PROCESSED PRODUCTS OF THE MONETARY COMPENSATORY AMOUNTS APPLICABLE TO THE BASIC PRODUCTS HAD BECOME SO MARKED AS FOR THE DIFFERENCE IN PRICES OF THE BASIC PRODUCTS TO HAVE A CONSIDERABLE EFFECT ON THE CONDITIONS OF COMPETITION OF THE PROCESSED PRODUCTS . THEREFORE THE STATEMENT OF THE REASONS ON WHICH REGULATION NO 800/77 WAS BASED IS SUFFICIENT .
11THE PLAINTIFF AND THE ITALIAN GOVERNMENT SUBMIT THAT THE COMMISSION APPLIED MONETARY COMPENSATORY AMOUNTS TO THE PRODUCTS AT ISSUE NOT IN ORDER TO DEAL WITH THE DIFFICULTIES TO WHICH MONETARY INSTABILITY MIGHT GIVE RISE FOR THE PROPER FUNCTIONING OF THE COMMON ORGANIZATIONS OF THE MARKET , BUT IN ORDER TO DEAL WITH THE DIFFICULTIES COMPLAINED OF BY IRISH PROCESSING INDUSTRIES IN TRADE WITH THE UNITED KINGDOM . THEY SUBMIT THAT APPLICATION OF MONETARY COMPENSATORY AMOUNTS TO THE PRODUCTS AT ISSUE IN RESPECT OF TRADE BETWEEN MEMBER STATES AND WITH NON-MEMBER COUNTRIES IS NOT JUSTIFIED BY THE SMALL INCIDENCE WHICH THE MONETARY DIFFERENCES MIGHT HAVE ON THE PRICES OF THE PROCESSED PRODUCTS . THEY SUBMIT THAT UNDER ARTICLE 14 OF REGULATION NO 1059/69 , THE COUNCIL COULD HAVE TAKEN APPROPRIATE MEASURES EITHER TO DEAL WITH THE POSSIBLE EFFECT ON TRADE BETWEEN MEMBER STATES AND WITH NON-MEMBER COUNTRIES OF SPECIAL MEASURES ADOPTED UNDER THE COMMON ORGANIZATIONS AS REGARDS THE PRICES OF CERTAIN BASIC PRODUCTS , OR TO DEAL WITH A SPECIAL SITUATION WHICH MAY ARISE IN RESPECT OF CERTAIN GOODS . THEY SUBMIT THAT , IN THE PART CONCERNING THE PRODUCTS TO WHICH THIS ACTION REFERS , REGULATION NO 800/77 BREACHES THE PRINCIPLE OF PROPORTIONALITY BECAUSE A MEASURE TAKEN UNDER THE SAID ARTICLE 14 WOULD HAVE BEEN ADEQUATE AND SUFFICIENT TO DEAL WITH THE DIFFICULTIES ENCOUNTERED BY THE IRISH PROCESSING INDUSTRIES IN THE LIMITED SECTOR OF TRADE WITH THE UNITED KINGDOM , WHEREAS THE APPLICATION OF COMPENSATORY AMOUNTS WAS NEITHER NECESSARY NOR IN PROPORTION TO THE AIM PURSUED .
12THE COMMISSION STATES THAT IN 1975 IT ADOPTED A PRACTICE WHEREBY MONETARY COMPENSATION WAS TO BE FIXED ONLY IN RESPECT OF PROCESSED PRODUCTS ON WHICH THE MAXIMUM AVERAGE INCIDENCE OF THE COMPENSATION EXCEEDED 5% . ON 1 JANUARY 1977 THE DIFFERENCE BETWEEN THE SO-CALLED GREEN RATES FOR THE POUND STERLING AND THE IRISH POUND WAS 24.3% , WHICH GAVE RISE TO REPEATED REPRESENTATIONS BY THE IRISH GOVERNMENT AND , FOLLOWING THOSE REPRESENTATIONS , TO THE DECISION OF 23 MARCH 1977 AUTHORIZING IRELAND TO TAKE PROTECTIVE MEASURES . THE COMMISSION STATES THAT MORE THOROUGH ANALYSIS OF THE LEGAL AND ECONOMIC SITUATION REVEALED THAT THE PROBLEMS POSED COULD NOT BE ADEQUATELY DEALT WITH BY THE DECISION ADOPTED IN RESPECT OF IRELAND . IT STATES THAT AT THE TIME WHEN REGULATION NO 800/77 WAS ADOPTED , THE RATES OF DIFFERENCE OF THE VARIOUS CURRENCIES TAKEN INTO ACCOUNT FOR THE FIXING OF THE COMPENSATORY AMOUNTS WERE AS FOLLOWS : POUND STERLING , - 34.7% ; IRISH POUND , - 10.4% ; FRENCH FRANC , - 16.2% ; ITALIAN LIRA , - 21.1% ; GERMAN MARK , + 9.3% ; BELGIAN AND LUXEMBOURG FRANCS , + 1.4% ; NETHERLANDS GUILDER , + 1.4% ; DANISH KRONER , 0 . IT EMERGED FROM THIS THAT THE DIFFERENCE BETWEEN THE POUND STERLING AND THE IRISH POUND WAS MUCH SMALLER THAN THE DIFFERENCE BETWEEN THE POUND STERLING AND ALL THE STRONG CURRENCIES AND BETWEEN THE GERMAN MARK AND THE ITALIAN LIRA . FURTHERMORE THE ACTUAL INCIDENCE OF THE MONETARY COMPENSATION ON THE PRODUCTS AT ISSUE EXCEEDED THE 5% LIMIT WHICH WAS REGARDED IN 1975 AS A DECISIVE FACTOR FOR THE ABOLITION OF THE SAID COMPENSATION . ARTICLE 14 OF REGULATION NO 1059/69 REFERS TO THE COUNCIL ' S ADOPTING ' ' APPROPRIATE MEASURES ' ' ONLY ' ' TO DEAL WITH THE POSSIBLE EFFECT ON TRADE BETWEEN MEMBER STATES AND WITH THIRD COUNTRIES OF SPECIAL MEASURES WHICH MAY BE ADOPTED UNDER THE COMMON ORGANIZATION OF AGRICULTURAL MARKETS AS REGARDS THE PRICES OF CERTAIN BASIC PRODUCTS ' ' . THE COMMISSION SUBMITS THAT CONSEQUENTLY THIS PROVISION IS NOT APPROPRIATE TO DEAL WITH THE RISK OF DISTURBANCES IN TRADE IN PROCESSED PRODUCTS CAUSED BY THE MONETARY SITUATION OF THE MEMBER STATES .
13THE PLAINTIFF AND THE ITALIAN GOVERNMENT HAVE NOT CALLED IN QUESTION THE STATISTICAL DATA SUPPLIED BY THE COMMISSION .
14THE PLAINTIFF SUBMITS THAT THE EXTENSION OF THE MONETARY COMPENSATION SYSTEM TO CONFECTIONERY PRODUCTS IS NOT JUSTIFIED BY THE FACT THAT THE COMPENSATORY AMOUNTS APPLIED TO THE BASIC PRODUCTS ALSO LED TO PRICE DIFFERENCES AND DISTORTIONS AT THE STAGE OF THE PROCESSED PRODUCTS , BECAUSE THE COMMISSION FAILED TO STATE WHY IT EXTENDED THE COMPENSATORY AMOUNTS SYSTEM TO CERTAIN PROCESSED AGRICULTURAL PRODUCTS BUT NOT TO OTHER IMPORTANT GROUPS OF PRODUCTS - SUCH AS , IN PARTICULAR , PASTA , MARMALADE , JAM AND PRESERVED FRUIT CONTAINING SUGAR . IT SUBMITS THAT THE ABSENCE OF COMPENSATORY AMOUNTS ON THE LATTER PRODUCTS ENTAILED DISCRIMINATION BETWEEN EXPORTERS OF THOSE PRODUCTS AND EXPORTERS OF PRODUCTS CAUGHT BY THE CONTESTED REGULATION .
15HOWEVER , THE COMMISSION IS NOT BOUND TO FIX COMPENSATORY AMOUNTS FOR ALL THE PRODUCTS IN A GROUP , BUT MAY ASSESS THE NEED TO APPLY COMPENSATORY AMOUNTS EITHER BY PRODUCTS OR BY GROUPS OF PRODUCTS . MOREOVER , THE PLAINTIFF HAS NOT SHOWN THAT IT IS A QUESTION OF SIMILAR PRODUCTS WHICH ARE IN COMPETITION WITH THE PRODUCTS COVERED BY THE REGULATION . THEREFORE IT MUST BE FOUND THAT IT WAS OPEN TO THE COMMISSION TO ADOPT REGULATION NO 800/77 AND TO FIX MONETARY COMPENSATORY AMOUNTS FOR THE PRODUCTS IN QUESTION .