1 By application received at the Court Registry on 7 October 1997 the Commission of the European Communities brought an action under Article 169 of the EC Treaty (now Article 226 EC) for a declaration that, by allowing, contrary to Article 2 of Commission Regulation (EEC) No 2252/90 of 31 July 1990 concerning the methods of implementation of Council Regulation (EEC) No 2060/90 on transitional measures concerning trade with the German Democratic Republic in the agriculture and fisheries sector (OJ 1990 L 203, p. 61), goods for which a refund had been granted on their importation from the Netherlands to be brought into the Federal Republic of Germany without a levy corresponding to the Community level of prices being charged and made available to the Community and by abolishing all customs formalities in inter-German trade and by not adopting the measures required to implement Regulation No 2252/90, the Federal Republic of Germany has failed to fulfil its obligations under the EC Treaty. Legislative background
2 Pursuant to Articles 1(c) and 14(2) of Regulation (EEC) No 804/68 of the Council of 27 June 1968 on the common organisation of the market in milk and milk products (OJ, English Special Edition 1968 (I), p. 176), a levy is to be charged on imports of butter into the Community.
3 However in the case of trade between the Community and the German Democratic Republic (hereinafter the GDR), Article 1(1) of Regulation No 2252/90 declares that the conditions for suspension of the collection of levies and the application of other charges, quantitative restrictions and measures having equivalent effect resulting from the common arrangements for agricultural products referred to in Article 1 of Council Regulation (EEC) No 2060/90 of 16 July 1990 on transitional measures concerning trade with the German Democratic Republic in the agriculture and fisheries sector (OJ 1990 L 188, p. 1) are met. The latter provision states that Regulation No 2060/90 is to apply to the agricultural products listed in Annex II to the EEC Treaty and to goods resulting from the processing of agricultural products as referred to in Council Regulation (EEC) No 3033/80 of 11 November 1980 laying down the trade arrangements applicable to certain goods resulting from the processing of agricultural products (OJ 1980 L 323, p. 1), as amended by Council Regulation (EEC) No 1436/90 of 21 May 1990 (OJ 1990 L 138, p. 9) (hereinafter the agricultural products).
4 Article 1(2) of Regulation No 2252/90 states that such suspension does not apply to products that have been shown to have been: - wholly obtained in the German Democratic Republic, - imported and released for free circulation in the German Democratic Republic on collection of a levy at the Community level, - imported from the Community and released for free circulation in the German Democratic Republic without benefit of any Community export refund. ...
5 Pursuant to Article 2 of Regulation No 2252/90: [A]rticles 2 to 5 of Regulation (EEC) No 1795/90 shall apply to the movement of the products and goods referred to in Article 1 of Regulation (EEC) No 2060/90 between the Community and the German Democratic Republic.
6 According to Article 3 thereof, Regulation No 2252/90 entered into force on 1 August 1990.
7 The third recital in the preamble to Regulation No 2252/90 states: Whereas in applying this Regulation the Federal Republic of Germany will maintain a close liaison with the Commission in order to be able to take, in concert with the German Democratic Republic, such measures as may be necessary to ensure that the provisions of the common agricultural policy as regards third countries are not circumvented.
8 The fifth recital of that regulation states: Whereas to avoid products that are not priced at a similar level to that in the Community being imported into the Community without any levy being collected, suspension must be made contingent upon certain conditions being met, in particular that the products in question should originate in the German Democratic Republic.
9 Article 2 of Commission Regulation (EEC) No 1795/90 of 29 June 1990 concerning the methods of implementation of Council Regulation (EEC) No 1794/90 on the transitional measures for trade with the German Democratic Republic (OJ 1990 L 166, p. 3) states: 1. The Community transit procedure shall apply to the movement of goods between the Community and the German Democratic Republic. ... 3. Within the meaning of this article the movement of goods between the Federal Republic of Germany and the German Democratic Republic shall be considered to be carried out within the territory of a single Member State.
10 Under Article 2 of Council Regulation (EEC) No 4151/88 of 21 December 1988 laying down the provisions applicable to goods brought into the customs territory of the Community (OJ 1988 L 367, p. 1): Goods brought into the customs territory of the Community shall, from the time of their entry, be subject to customs supervision.
11 Article 1(2)(b) of Regulation No 4151/88 states that, for the purposes of that regulation, "customs supervision" means action taken in general by the customs authority with a view to ensuring compliance with customs rules and, where appropriate, with other rules applicable to goods brought into the customs territory of the Community.
12 Article 3 of that regulation provides: Goods brought into the customs territory of the Community shall be conveyed by the person bringing them into the Community without delay, by the route specified by the customs authority and in accordance with its instructions, if any: (a) either to the customs office specified by the customs authority or to any other place specified or approved by that authority; (b) or to a free zone...
13 Pursuant to Article 2(1) of Council Regulation (EEC) No 2144/87 of 13 July 1987 on customs debt (OJ 1987 L 201, p. 15): A customs debt on importation shall be incurred by: ... (b) the unlawful introduction into the customs territory of the Community of goods liable to import duties. ... For the purposes of this point, unlawful introduction means any introduction in violation of the provisions adopted in implementation of Article 2 of Council Directive 68/312 ... as last amended by the Act of Accession of Spain and Portugal; ...
14 Council Directive 68/312/EEC of 30 July 1968 on harmonisation of the provisions laid down by law, regulation or administrative action relating to: 1. customs treatment of goods entering the customs territory of the Community; 2. temporary storage of such goods (OJ, English Special Edition 1968 (II), p. 416) was repealed by Article 26(1) of Regulation No 4151/88: Articles 2 and 3 of that regulation correspond to, and at the same time supplement, Article 2 of that directive.
15 Under Article 1(2)(d) of Regulation No 2144/87, for the purposes of that regulation, import duties means agricultural levies and other import charges laid down under the common agricultural policy.
16 Article 2(1) of Council Regulation (EEC, Euratom) No 1552/89 of 29 May 1989 implementing Decision 88/376/EEC, Euratom on the system of the Communities' own resources (OJ 1989 L 155, p. 1) provides: For the purpose of applying this Regulation, the Community's entitlement to the own resources referred to in Article 2(1)(a) and (b) of Decision 88/376/EEC, Euratom shall be established as soon as the amount due has been notified by the competent department of the Member State to the debtor. Notification shall be given as soon as the debtor is known and the amount of entitlement can be calculated by the competent administrative authorities, in compliance with all the relevant Community provisions.
17 The first subparagraph of Article 9(1) of Regulation No 1552/89 provides: ... each Member State shall credit own resources to the account opened in the name of the Commission with its Treasury or the body it has appointed.
18 Under Article 17(1) and (2) of that regulation: 1. Member States shall take all requisite measures to ensure that the amount corresponding to the entitlements established under Article 2 are made available to the Commission as specified in this regulation. 2. Member States shall be free from the obligation to place at the disposal of the Commission the amounts corresponding to established entitlements solely if, for reasons of force majeure, these amounts have not been collected. In addition, Member States may disregard this obligation to make such amounts available to the Commission in specific cases if, after thorough assessment of all the relevant circumstances of the individual case, it appears that recovery is impossible in the long term for reasons which cannot be attributed to them. These cases must be mentioned in the report provided for in paragraph 3 if the amounts exceed ECU 10 000 ...; this report must contain an indication of the reasons why the Member State was unable to make available the amounts in question. The Commission has six months in which to forward, if appropriate, its comments to the Member State concerned. Facts and pre-litigation procedure
19 It is apparent from the documents before the Court that, between 15 and 24 August 1990, consignments of butter exported from the Netherlands, in respect of which export refunds had been granted, were imported into Germany, passing through the GDR, without any levy being charged.
20 By letter of 22 June 1994, the Commission informed the German Government that, for the consignments of butter concerned, the conditions laid down in Article 1(2) of Regulation No 2252/90 allowing butter to be imported into the Community without any levy being charged had not been met. The Federal Republic of Germany having thus unlawfully reduced the own resources of the Community, the Commission called on the German Government to pay it by 15 September 1994 the sum of DEM 12 684 800 corresponding to the amount of the levy which should have been charged.
21 The German Government contended that no customs debt had arisen since the consignments of butter had not been brought into the territory of the Community in breach of Article 2(1)(b) of Regulation No 2144/87 as a result in particular of certain features peculiar to inter-German trade. It also claimed that any proceedings had to be commenced primarily in the Netherlands since the export refunds had been wrongly paid there.
22 On 13 September 1995 the Commission initiated the procedure provided for in Article 169 of the Treaty by sending a letter of formal notice to the Federal Republic of Germany.
23 In its reply of 12 January 1996 the German Government denied having failed to fulfil its obligations under the Treaty and reiterated its view that no customs debt had arisen when the consignments of butter in question were imported.
24 By letter of 30 October 1996, the Commission issued a reasoned opinion.
25 On 30 December 1996 the German Government replied to the reasoned opinion, contending that the Commission had not taken sufficient account of the particular and exceptional situation created by the process of German reunification, that it had not correctly apprehended the legal significance of the repayment of the export refunds granted in the Netherlands and that no debt had arisen in respect of the levy.
26 The Commission rejected that argument and brought the present action. Substance Arguments of the parties
27 The Commission's first allegation is that the Federal Republic of Germany, in breach of Article 2 of Regulation No 2252/90, allowed to be brought into its territory between 14 and 24 August 1990 consignments of butter which had attracted export refunds on leaving the Netherlands but had not charged an import levy and made it available to the Community.
28 It maintains that, since in this case the conditions for levy-free importation laid down in Article 1(2) of Regulation No 2252/90 were not met, an import levy should have been charged, in accordance with Article 14(2) of Regulation No 804/68. The introduction of the consignments of butter concerned into the Community free of that levy thus infringed that provision and, as a result of that infringement of Community law, the conditions laid down in Article 2(1)(b) of Regulation No 2144/87 governing customs debt had not been met. Under Article 2(1) and the first subparagraph of Article 9(1) of Regulation No 1552/89, the Federal Republic of Germany should have established and made available to the Community the amount corresponding to the import levy.
29 The German Government contends, first, that it did not fail to fulfil its obligations under the Treaty since no customs debt arose in respect of any levy. Under Article 2(1)(b) of Regulation No 2144/87, for a customs debt to arise, there must be not only liability to the levy but also unlawful introduction of the goods. However, in this case, the latter condition was not satisfied since, on the material dates, there was no obligation under customs legislation to subject the consignments of butter concerned to a customs procedure by virtue of their crossing the inter-German border.
30 It observes that, apart from the second subparagraph of Article 1(2) thereof, which is not relevant to this case, Regulation No 2252/90 contains no procedural provisions.
31 The German Government also contends that the customs formalities to be observed likewise did not derive from the reference made by Article 2 of Regulation No 2252/90 to Articles 2 to 5 of Regulation No 1795/90 since it is clear from Article 2(1) and (3) of the latter regulation that the provisions of Regulation No 2252/90 apply only to trade between the GDR and the Member States other than the Federal Republic of Germany and not to trade between the latter and the GDR. Furthermore, Article 2(3) of Regulation No 1795/90 applied both to goods subject to the levy and to those not so subject.
32 Second, the German Government contends that although the third indent of the first subparagraph of Article 1(2) of Regulation No 2252/90 could not be applied retroactively to the case of a repaid export refund, it is clear from that provision that there is a legal link between the export refund and the levy. Referring to Case C-347/93 Belgian State v Boterlux [1994] ECR I-3933, it contends that the present case is a typical instance of a closed circuit. In this case the decision ordering repayment of the export refund paid in the Netherlands was confirmed by a Netherlands court. The Community budget has not therefore been adversely affected. According to the German Government, the consignments of butter concerned should therefore be regarded as having once again entered Community economic channels, any need to charge levies thereby being removed.
33 Third, the German Government submits that Article 2 of Regulation No 1552/89 requires, as an essential precondition, a Community entitlement, that is to say an existing customs debt, and the same applies to Article 17 of the same regulation, paragraph 1 of which expressly refers to Article 2. Accordingly, since no customs debt based on a levy arose, there can be no question of claiming from the Federal Republic of Germany own resources which were not determined and not paid.
34 The Commission's second allegation is based on the fact that the Federal Republic of Germany abolished prematurely, before the date of reunification, namely 3 October 1990, all customs formalities in inter-German trade and failed to take the measures needed to implement Regulation No 2252/90.
35 In that connection, it observes that the existence of a common market necessarily presupposes the collection of uniform customs duties at all external frontiers of the Community. Until the date of reunification, the frontier between the Federal Republic of Germany and the GDR, despite the various special customs regimes and notwithstanding the establishment of monetary, economic and social union, was an external frontier of the Community. Trade in agricultural products had been subject to Regulation No 2252/90, under which the only exception applicable to inter-German trade was trade in goods on which a levy was not required to be charged. The objective of that regulation had been specifically to prevent both the introduction of goods into Germany, as part of the Community territory, through the GDR without levies being charged and any infringement of Community legislation. The attainment of that objective required the introduction or maintenance of customs controls.
36 The German Government replies that the aim of the customs and agricultural union between the Community and the GDR was precisely to do away with controls on goods crossing the inter-German border. The introduction of that union, de facto on 1 July 1990 and for agricultural products on 1 August 1990, was not only the subject of an agreement between the two German States but was also expressly required by the Commission. All the Member States were required to participate in the same way in the liberalisation of the movement of goods from both sides of the inter-German border. Findings of the Court
37 It is appropriate to consider the Commission's second allegation first.
38 It should be noted at the outset that Article 10 of the Treaty of 31 August 1990 on the establishment of German Unity (BGBl. 1990 II, p. 889) rendered Community legislation applicable in the GDR as from that country's accession to the Federal Republic of Germany, namely from 3 October 1990 (see Case C-223/95 Moksel v Hauptzollamt Hamburg-Jonas [1997] ECR I-2379, paragraph 22). It follows that, until that date, the GDR constituted a non-member country vis-à-vis the Community and the customs rules normally applicable to products coming from non-member countries applied, in principle, to those coming from the GDR.
39 However, in the case of agricultural products, as from 1 August 1990 the charging of import levies and the application of other taxes and quantitative restrictions and measures having equivalent effect resulting from the common regime for such products were suspended in trade between the Community and the GDR under Articles 1 and 3 of Regulation No 2252/90. Nevertheless, that suspension applied only to products shown to meet one of the three conditions laid down in the first subparagraph of Article 1(2) of Regulation No 2252/90, namely that they were: - wholly obtained in the German Democratic Republic, - imported and released for free circulation in the German Democratic Republic on collection of a levy at the Community level, - imported from the Community and released for free circulation in the German Democratic Republic without benefit of any Community export refund.
40 By granting that suspension subject to certain conditions, Regulation No 2252/90 thus introduced an exception to the Community customs rules normally applicable to products coming from non-member countries. It follows that, outside the scope of that exception, those rules were applicable until the date of reunification.
41 Those rules include, in particular, Articles 2 and 3 of Regulation No 4151/88, from which it is clear that goods brought into the customs territory of the Community are, from the time of their entry, subject to customs supervision and must be conveyed by the person bringing them into the Community without delay either to the customs office specified by the customs authority or to any other place specified or approved by that authority or to a free zone.
42 Consequently, to enable it to verify whether agricultural products brought into the territory of the Community fulfilled any of the conditions laid down in the first subparagraph of Article 1(2) of Regulation No 2252/90 and, if they did not, to apply the various taxes and other measures resulting from the common regime for such products, the Federal Republic of Germany was under an obligation to maintain customs formalities, such as those needed for the application of Articles 2 and 3 of Regulation No 4151/88 in inter-German trade, or to adopt other measures ensuring that Regulation No 2252/90 was correctly applied.
43 In that context, it is appropriate to point out that the third recital in the preamble to Regulation No 2252/90 states that the Federal Republic of Germany is to maintain a close liaison with the Commission in order to take, in concert with the GDR, such measures as may be necessary to ensure that the provisions of the common agricultural policy as regards third countries are not circumvented.
44 As regards the German Government's argument that the establishment of a customs and agricultural union was based on an agreement between the two German States, it is clear from the case-law that a Member State cannot rely on an agreement concluded by it with a non-member country to justify failure to observe existing provisions of Community law (see, to that effect, Case 22/70 Commission v Council [1971] ECR 263, paragraph 17).
45 As regards the German Government's assertion that the establishment of a customs and agricultural union was expressly required by the Commission, it need merely be pointed out that the Commission may not, except where such powers are expressly conferred upon it, give guarantees concerning the compatibility of particular practices with Community law. In no circumstances does it have the power to authorise practices which are contrary to Community law (Case C-340/96 Commission v United Kingdom [1999] ECR I-2023, paragraph 31).
46 It follows that the Commission's second allegation must be upheld.
47 As regards the Commission's first allegation, it is clear from Articles 1(c) and 14(2) of Regulation No 804/68 that levies are chargeable on the import of butter into the Community.
48 It is common ground that, upon importation into Germany, and thus into the Community, the consignments of butter at issue fulfilled none of the conditions laid down in the first subparagraph of Article 1(2) of Regulation No 2252/90. Although imported into the Community and released for free circulation in the GDR, they had benefited from an export refund in the Netherlands.
49 It follows that the consignments of butter concerned could not benefit from the suspension provided for by Article 1 of Regulation No 2252/90, with the result that an import levy had to be charged.
50 As regards the German Government's argument that no customs debt arose because Regulation No 2252/90 does not provide for the observance of any customs procedure, paragraph 40 of this judgment makes it clear that, outside the scope of the exception provided for by Regulation No 2252/90, the customs rules normally applicable to products from non-member countries remained applicable until the date of reunification.
51 Moreover, as found in paragraph 41 of this judgment, under Articles 2 and 3 of Regulation No 4151/88, goods brought into the customs territory of the Community are, from the time of their entry, subject to customs supervision and must be conveyed by the person bringing them into the Community without delay either to the customs office specified by the customs authority or to any other place specified or approved by that authority or to a free zone.
52 It is true that it follows from Article 2(1)(b) of Regulation No 2144/87, in conjunction with Article 26(1) of Regulation No 4151/88, that a customs debt is incurred by the introduction into the customs territory of the Community of goods liable to import duties in breach of the national provisions adopted for the application of Articles 2 and 3 of Regulation No 4151/88. However, as is clear from paragraph 42 of this judgment, the Federal Republic of Germany repealed those provisions in breach of Community law. In those circumstances, the German Government cannot invoke the absence of any customs debt in order to escape the obligation of charging import levies.
53 As regards the German Government's argument concerning the reference made by Article 2 of Regulation No 2252/90 to Articles 2 to 5 of Regulation No 1795/90, it must be held that, although Article 2 of Regulation No 2252/90 does not expressly refer to the products which are shown to meet one of the conditions laid down in the first subparagraph of Article 1(2) of that regulation, it is clear from settled case-law of the Court that, where a provision of Community law is open to several interpretations, preference must be given to that interpretation which ensures that the provision retains its effectiveness (see, in particular, Case C-434/97 Commission v France [2000] ECR I-1129, paragraph 21).
54 It is clear from the fifth recital in the preamble to Regulation No 2252/90 that the aim of making application of the suspension of the collection of levies contingent upon the conditions laid down in the first subparagraph of Article 1(2) was to avoid products not priced at a similar level to that in the Community being imported into the Community without any levy being collected.
55 If, as the German Government contends, that provision were inapplicable to trade between the GDR and the Federal Republic of Germany and if Article 2(3) of Regulation No 1795/90 were applicable also to the products on which an agricultural levy was chargeable, the aim of the first subparagraph of Article 1(2) of Regulation No 2252/90 would not be attained. Such an interpretation would entirely negate that provision in that it would have enabled any agricultural product to enter Germany, and hence the Community, regardless of whether or not it was priced at a similar level to that in the Community.
56 It follows that the reference to Articles 2 to 5 of Regulation No 1795/90 contained in Article 2 of Regulation No 2252/90 applied only to products which benefited from the suspension of the collection of levies on importation from the GDR, that is to say to those which met any one of the three conditions laid down in the first subparagraph of Article 1(2) of the latter regulation.
57 As regards the German Government's argument based on the fact that a Netherlands court ordered repayment of the export refund granted in the Netherlands, it must be pointed out that the Community import and export rules operate independently from each other. Although the third condition laid down in the first subparagraph of Article 1(2) of Regulation No 2252/90 does create a link between the grant of the export refund and, in particular, the collection of import levies, the only purpose pursued was to identify the agricultural products for which such collection was suspended in trade between the Community and the GDR.
58 It must be borne in mind that Article 1 of Regulation No 2252/90 suspended the collection of import levies solely for agricultural products which had been shown to meet one of the three conditions laid down in the first subparagraph of Article 1(2) thereof. As is clear from paragraphs 40 and 41 of this judgment, if none of those conditions were fulfilled the customs rules normally applicable to agricultural products from non-member countries, including Articles 2 and 3 of Regulation No 4151/88, were applicable. It was thus when they were brought in to the Community territory that the products concerned had to meet one of the three conditions, not at a later stage.
59 That conclusion is corroborated both by the purpose of the first subparagraph of Article 1(2) of Regulation No 2252/90, which, as is clear from the fifth recital in the preamble thereto, was the avoidance of imports into the Community, without levies being collected, of products not priced at a similar level to that in the Community, and by the wording of that regulation, which allows no retroactive application.
60 It follows that the obligation to charge the import levy on the consignments of butter concerned, which had benefited from an export refund in the Netherlands, to which the Federal Republic of Germany became subject when they entered the Community territory, exists irrespective of the outcome of any proceedings for infringement of the Community export rules.
61 As regards the Boterlux judgment, cited above, the Court held in paragraph 37 thereof that the exporter of a product destined for a non-member country loses his right to a refund where the product is fraudulently re-imported into the Community notwithstanding the fact that he did not take part in the fraud or that he acted in good faith. However, it said nothing about the obligation to charge import levies when the exporter is deprived of his right to a refund.
62 As to the German Government's argument that the Community budget was not adversely affected, it need merely be pointed out that failure by a Member State to fulfil an obligation imposed by a rule of Community law is sufficient to constitute a breach of Treaty obligations and the fact that the failure had no adverse effects is irrelevant (see Case C-150/97 Commission v Portugal [1999] ECR I-259, paragraph 22).
63 As regards, finally, the assertion that own resources not determined and not paid could not be claimed from the Federal Republic of Germany because no customs debt based on a levy arose, it must first be pointed out that it is clear from paragraph 52 of this judgment that, having repealed the national provisions adopted for the implementation of Articles 2 and 3 of Regulation No 4151/88 in breach of Community law, the German Government cannot invoke the absence of any customs debt in order to escape the obligation to charge import levies.
64 Next, it is clear from paragraph 49 of this judgment that an import levy should have been charged on the consignments of butter concerned. Under Article 2(1) of Regulation No 1552/89, an entitlement of the Community to own resources such as those at issue in this case is established as soon as the amount due is notified by the competent department of the Member State to the person from whom it is due. According to the case-law, that provision must be interpreted as meaning that the Member State may not dispense with determining the claims, even where they dispute them, since otherwise it would have to be accepted that the financial equilibrium of the Community may be disrupted, even temporarily, by the arbitrary conduct of a Member State (see, to that effect, Case C-96/89 Commission v Netherlands [1991] ECR I-2461, paragraph 37).
65 Finally, it is clear from Article 9(1) of Regulation No 1552/89 that the Member States are under an obligation to credit own resources to the account opened in the name of the Commission. Moreover, under Article 17(2) of the same regulation, it is only if recovery has not been possible for reasons of force majeure or if it appears that recovery is impossible in the long term for reasons which cannot be attributed to the Member State concerned that the latter is freed from the obligation to place at the disposal of the Commission the amounts corresponding to established entitlements. However, the German Government has not sought to rely on any such reasons.
66 It follows that the Commission's first allegation must also be upheld.
67 In those circumstances, it must be held that, by allowing, contrary to Article 2 of Regulation No 2252/90, goods for which a refund had been granted on their exportation from the Netherlands to be brought into the Federal Republic of Germany without a levy corresponding to the Community level of prices being charged and made available to the Community and by abolishing all customs formalities in inter-German trade and by not adopting the measures required to implement Regulation No 2252/90, the Federal Republic of Germany has failed to fulfil its obligations under the EC Treaty.