My Lords,

This case comes to the Court by way of a reference for a preliminary ruling by the Tribunale of Genoa. The Plaintiff in the proceedings before the Tribunale is a firm called Fratelli Zerbone S.N.C. which carries on in Genoa a business that consists in, or at all events includes, importing meat. There are two Defendants. The first is the Amministrazione delle Finanze dello Stato, which is the effective Defendant and to which I shall henceforth refer simply as ‘the Defendant’. The second is the Società Italiana Cauzioni S.p.A. of Rome. Its role in the case is not clear and it has taken no part in the proceedings before this Court.

It so happens that the Community legislation that is relevant in this case is precisely the same as that which is relevant in Case 126/76 Dietz v Commission which Your Lordships have at present under consideration. I need not therefore set it all out. It is the legislation whereby monetary compensatory amounts (or ‘mca's’) were introduced in the Federal Republic of Germany and in the Netherlands in May 1971, extended to Belgium and Luxembourg in August 1971 and then extended to France and Italy in, December 1971.

The questions raised in the present case are however different from those arising in the Dietz case.

The facts of the present case, at all events as stated by the Plaintiff, may be culled in part from the Order for Reference and in more detail from the Plaintiff's written observations as supplemented by a table put in by the Plaintiff at the Court's request. They are briefly these.

Between 2 June and 9 November 1971 the Plaintiff entered into a number of contracts with suppliers in various South American countries for the purchase and shipment to Italy of frozen beef and veal. In each case the contract prescribed a price expressed in US dollars, to be paid by means of an irrevocable banker's documentary credit.

The documentary credits thus stipulated for were opened on various dates in September, October and November 1971, and in January and March 1972. They were all subject to the Uniform Customs and Practice for Documentary Credits' sponsored by the International Chamber of Commerce.

In view of the nature of some of the arguments presented to us, and of one of the questions referred to the Court by the Tribunale, it may be helpful if I recall briefly the procedure that applies where, under an international contract for the sale of goods, it is agreed that payment shall be made under a banker's documentary credit. The first step is for the buyer to instruct a bank in his own country (the ‘issuing bank’) to open such a credit for the seller, on specified terms. The issuing bank then arranges with a bank in the seller's country (the ‘advising bank’), which may be either a local branch of the issuing bank or a correspondent, for it to pay the price of the goods to the seller upon delivery of the shipping documents by the seller to the advising bank. The advising bank then advises the seller of the opening of the credit in his favour. Where the credit is irrevocable (i.e. irrevocable by the issuing bank), the advising bank may confirm it, thus rendering itself, as well as the issuing bank, liable to the seller. The method whereby the buyer meets his liability to the issuing bank is generally a matter for agreement between them, though there may be provisions of their local law applicable to it. The buyer may have a current account with the issuing bank (whether or not the subject of overdraft facilities) to which the amount of that liability can simply be debited; or the buyer may place the bank in funds in advance; or he may undertake to reimburse it. In that case the undertaking may be secured by a pledge of the shipping documents. (See generally Schmitthoffs ‘The Export Trade’ (5th Ed.) pp. 199 et seq.).

In the present case we do not know whether the credits were confirmed, which is not of great moment, nor do we know what the arrangements were between the Plaintiff and the issuing banks. The table to which I have referred does however list the dates of the actual payments to the sellers and the rates of exchange that were actually applied. The earliest of those dates was 27 December 1971, the latest 29 March 1972. The rates of exchange that were applied ranged from Lit 594.60 to 582.325 to the dollar. In other words they fell within the margins of fluctuation permitted for the lira after the ‘Smithsonian Agreement’ of 18 December 1971, which were 594.80 to 568.40 to the dollar. Before that Agreement those margins had been 629.50 to 620.50 to the dollar.

The goods purchased under the contracts arrived at Genoa on various dates in the early pan of 1972. They were cleared through customs there on dates ranging from 8 February 1972 to 15 May 1972, that is after the date (3 January 1972) when mca's had been extended to Italy. The Defendant levied on them mca's amounting in all to Lit 140771735. It is that sum that the Plaintiff seeks to recover in the present proceedings before the Tribunale of Genoa.

Before the Tribunale the Plaintiff put forward a number of arguments, some of which raised points of Community law and are reflected in the questions referred to this Court by the Tribunale. Those questions take up five pages in the Order for Reference. They are in two groups. The first group, lettered A, consists of questions on the interpretation of Article 4 of Commission Regulation (EEC) No 1013/71 of 17 May 1971 as amended by Article 4 of Commission Regulation (EEC) No 2887/71 of 30 December 1971. The second group, lettered B, consists of questions on the interpretation of Council Regulation (EEC) No 974/71 of 12 May 1971 itself.

I think it convenient to consider the latter group first.

The Tribunale introduces the first question in this group (question B 1) by reciting that ‘as the result of the monetary policy decisions adopted on 18 December 1971 and of the adoption of the “central exchange rates” by some Member States, the currencies of all the Member States were revalued in terms of the US dollar’ and that ‘on the other hand (according to the Plaintiff), in the first weeks when these provisions were applied, the Italian currency depreciated in value’. The Tribunale then asks: ‘On the assumption that the situation described by the Plaintiff is proved to have existed in fact, was the Italian Amministrazione delle Finanze legally entitled to levy the compensatory amounts while that situation lasted?’

That question is really one of interpretation of Article 1 (1) of Regulation No 974/71 (Official Journal L 106 of 12. 5. 1971), which was in these terms:

‘If, for the purposes of commercial transactions, a Member State allows the exchange rate of its currency to fluctuate by a margin wider than the one permitted by international rules, it shall be authorized to:

charge on imports from Member States and third countries,

grant on exports to Member States and third countries,

compensatory amounts for the products referred to below under the conditions determined hereinafter.’

The English text of that provision is deceptive, for it suggests that a Member State was to be authorized to apply mca's if it allowed the exchange rate of its currency to fluctuate by a margin wider than the one permitted by international rules, either upwards or downwards. That was not so. A consideration of the contents of the preamble to the Regulation and of the texts of Article 1 (1) in the other official languages of the Community makes it clear that it was only fluctuation upwards that was material. Indeed no-one concerned in this case has suggested otherwise. It was not till much later that (by Council Regulation (EEC) No 509/73 of 22 February 1973) Article 1 (1) was amended so as to make mca's applicable in a Member State with a depreciated currency.

So the substantial question here is whether it is true to say of Italy that, following the Smithsonian Agreement, it allowed the exchange rate of its currency to fluctuate above the margin permitted by international rules. Those rules are of course those contained in and derived from the Articles of Agreement establishing the International Monetary Fund (the ‘IMF’) — the ‘Bretton Woods Agreement’.

Article IV, Section 1 (a) of the Bretton Woods Agreement provided that ‘The par value of the currency of each member shall be expressed in terms of gold as a common denominator or in terms of the United States dollar of the weight and fineness in effect on 1 July 1944’. The latter was, as everyone knows, equivalent to 0.88867088 grams of fine gold. Putting it in another way, there were 35 dollars per ounce of fine gold. Section 3 (i) of Article IV provided that ‘The maximum and the minimum rates for exchange transactions between the currencies of members taking place within their territories shall not differ from parity in the case of spot exchange transactions, by more than one percent’. Sections 5 and following of Article IV laid down machinery for changing the par values of members' currencies. In general a change in the par value of a member's currency could be made only on the proposal of the member and after consultation with the IMF.

The features of the Smithsonian Agreement that are here relevant may be summarized as follows. As part of a realignment of the world's major currencies, the US dollar was to be devalued by 7.89 % and the lira by 1 %. So far as the dollar was concerned this meant a devaluation in terms of gold to 38 dollars per fine ounce, and the United States Government agreed to propose to Congress suitable legislation for that purpose. Upon passage of that legislation, the United States would propose the corresponding new par value of the dollar to the IMF. The par value of the lira was however left unaltered at Lit 625 to the dollar. By a decision of the Executive Directors of the IMF there was established a ‘temporary regime’ under which a member might permit the exchange rates for its currency to move within margins of 2¼ % on either side of the new exchange value of its currency resulting from the agreed realignment of exchange rates. That new exchange value, if notified to the Fund only for the purposes of this regime of wider margins and not proposed as a new par value, was to be referred to as a ‘central rate’. Such a central rate could be communicated in gold, in units of special drawing rights or in another member's currency. Under these arrangements Italy communicated a central rate of Lit 581.50 to the dollar. (See the IMF's ‘International Financial News Survey’ Vol. XXIII No 50 for 22-30 December, 1971 and Vol. XXIV No 4 of 2 February, 1972).

The result was that the lira was thenceforth allowed to fluctuate to the extent of 2¼ % on either side of Lit 581.50 to the dollar (i.e., as I have already indicated, between 594.60 and 568.40 to the dollar) instead of to the extent of only 1 % on either side of 625 to the dollar, which was the margin permitted under the Bretton Woods Agreement. It was explained to us at the hearing by an expert called on behalf of the Commission, and whose evidence was unchallenged, that that result was achieved without any intervention in the currency markets by the United States authorities, because it was the accepted system that those authorities never intervened either to support or to keep down the exchange value of the dollar. It was left to each of the other members of the IMF to intervene so as to maintain the exchange value of its own currency within the permitted margins in relation to the dollar.

In my opinion, that being so, it can truly be said that, following the Smithsonian Agreement, Italy did allow the exchange rate of its currency to fluctuate above the margin permitted by international rules. The only means of escape from that conclusion would be to hold that the ‘international rules’ mentioned in Article 1 (1) of Regulation No 974/71 included the Smithsonian Agreement itself and the measures adopted by the IMF thereunder. This indeed is what, at the hearing, we were urged on behalf of the Plaintiff to do. But that seems to me an impossible interpretation. The Smithsonian Agreement was itself a departure from the only international rules that the authors of the Regulation can have had in mind. It is significant that the preamble to the decision of the Executive Directors of the IMF to which I have referred introduced that decision as ‘intended to enable members to observe the purposes of the Fund to the maximum extent possible during the temporary period preceding the resumption of effective par values with appropriate margins in accordance with the Articles’.

Assuming that Your Lordships share my view in substance, it is not easy to be sure how the Court's answer to the Tribunale's question should be formulated. Any direct answer to that question would lack precision unless it contained a detailed description of the ‘situation’ there mentioned.

It was however pointed out during the course of the argument that, in the ultimate analysis, the question was really one as to the validity of the Commission Regulations that enabled Italy to apply mca's. Having regard to Article 6 of Regulation No 974/71, no Member State could apply mca's unless they were fixed by the Commission. Your Lordships will remember that mca's for Italy were first fixed by Commission Regulation (EEC) No 17/72 of 31 December 1971, which took effect on 3 January 1972. They were altered by Commission Regulation (EEC) No 144/72 of 21 January 1972 and again by Commission Regulation No 392/72 of 24 February 1972. They were abolished, for the time being, by the combined effect of Commission Regulations (EEC) Nos 978/72, 979/72 and 980/72 of 12 May 1972, which took effect, as regards beef and veal, on 15 May 1972. We were told on behalf of the Commission that this abolition resulted from the communication by the USA to the IMF on 8 May 1972 of the new par value for the dollar. Quite how this affected the par value of the lira and hence the permitted margins of fluctuation for that currency was not explored. At all events the lawfulness of the abolition was not challenged.

I therefore suggest that, in answer to the Tribunale's question B 1. Your Lordships should say that consideration of that question has disclosed no factor of a kind such as to affect the lawfulness of the collection by the Defendant during the period from 3 January to 15 May 1972 of the mca's fixed by Commission Regulations in respect of that period.

With the Tribunale's question B 2 I can, I think, deal more shortly. Omitting parenthetical references therein to Articles of Regulation No 974/71, that question is:

‘Bearing in mind that the compensatory amounts may vary from time to time, in accordance with variations in exchange rates, what is the date to be used as a reference point in the case of individual commercial transactions in determining whether or not the conditions required by Community legislation exist for the application of compensatory amounts …, for the fixing of the amount thereof … and for any alteration in them …; in particular, must reference be made to the date of importation or exportation of the goods, or the date on which the price is paid or to any other moment in time?’

No observations on that question were submitted on behalf of the Plaintiff.

The Italian Government and the Commission were at one in submitting that the relevant date was that of importation or exportation.

That was in fact expressly laid down later by Article 8 of Commission Regulation (EEC) No 648/73 of 1 March 1973 (now replaced by Article 8 of Commission Regulation (EEC) No 1380/75 of 29 May 1975). But at the time when the events in the present case occurred there was no express legislation on the point.

The Commission referred us to a line of decisions of this Court which, it suggested, might indirectly point to the answer, namely Case 35/71 Schleswig-Holsteinische Hauptgenossenschaft v Hauptzollamt Itzehoe [1971] ECR 1083, Case 186/73 Fleischkontor v Einfuhr- und Vorratsstelle für Schlachtvich [1974] ECR 533, Case 3/74 Einfuhr- und Vorratsstelle für Getreide und Futtermittel v Pfützenreuter [1974] ECR 589 and Case 113/75 Frecassetti v Amministrazione delle Finanze dello Stato [1976] ECR 983. In each of those cases, however, the Court was concerned to refine on the concept of ‘importation’ or of ‘day of importation’ to which the legislation there in question expressly referred. The Court was not concerned with the wider question raised here.

So I think that that question must be answered by reference to general considerations, from which the implicit intention of the authors of Regulation No 974/71, and to the Commission Regulations adopted thereunder, may be deduced. In the Frecassetti case I ventured to put forward certain general considerations which, I thought, helped in solving the problem there (see [1976] ECR 998). They were that -

(1)the day in question must be readily ascertainable;

(2)it must be so ascertainable in all cases and in all Member States;

(3)it must be such as to enable the rate of levy applicable to be determined before the levy became payable.

It seems to me that those considerations are relevant here also and that they point to the day of importation or exportation. The third, in particular, seems to me to exclude the alternative date expressly suggested by the Tribunale, namely the date on which the price is paid. In the case, for instance, of long term contracts, under which payment for the goods may be made at intervals, and perhaps with options as to the mode of payment, that date might fall after the date of clearance of the goods through customs.

I therefore think that Your Lordships should answer question B 2 by saying that the relevant date for determining whether mca's are payable and (if so) the amount thereof is the date of importation or exportation of the goods.

I turn to the questions in group A.

Those questions relate, as I have mentioned, to the interpretation of Article 4 of Regulation No 1013/71 as amended by Regulation No 2887/71. As so amended that Article provided, so far as here material, as follows:

‘1. The Member States referred to in Article 1 of Regulation (EEC) No 974/71 shall not apply the compensatory amounts referred to in that Article to imports effected under contracts:

(a)concluded before … 19 December 1971; and

(b)registered before … 28 December 1971 with the authorities of the relevant Member State or which can be proved by official documents to have been concluded.

2. However, paragraph 1 shall apply only to the extent necessary to allow the contract to be executed under the conditions which would have existed had the monetary measures referred to in Article 1 of Regulation (EEC) No 974/71 not been taken.’

It is not disputed, at all events at the present stage of this case, that the relevant contracts here were all concluded before 19 December 1971, nor is any issue raised as to their registration before 28 December 1971 or as to their being, in the alternative, capable of proof by official documents. The controversy centres on the proviso in paragraph 2 of Article 4.

That proviso is at first sight obscurely worded. (For the English reader its obscurity is enhanced by the use in the English text of the ambiguous word ‘executed’. As a study of the context and of the texts in the other official languages shows, that word is there used in the sense of ‘performed’).

To some extent the obscurity is dispelled by the preamble to Regulation No 1013/71 (Official Journal L 110 of 18. 5. 1971), which recites, among other things that ‘when provisions on the application of compensatory amounts are being implemented, potential repercussions on contracts concluded before 10 May 1971 should, as far as possible, be taken into account; … to this end compensatory amounts should not be levied on goods imported under such contracts where compensatory amounts might have economic consequences other than those which would have existed had monetary measures not been taken.’ (For present purposes ‘10 May 1971’ should of course be read as ‘19 December 1971’).

The Commission illustrated for us with an example what the proviso was intended to achieve. Suppose that an Italian importer, having contracted to buy goods for a price payable in dollars, had paid for them before 19 December 1971, after having obtained the necessary dollars against his lire at the rates of exchange prevailing before that date. He could derive no benefit from the subsequent devaluation of the dollar in relation to the lira, nor would the price at which he could profitably sell the goods on the Italian market be affected by that devaluation. So it would be neither fair, nor necessary for the protection of the common organisation of the market, that he should have to pay mca's on those goods. The same would be true if he had contracted to buy the goods for a price payable in lire. In either of those cases it would be true to say that it was necessary for paragraph 1 of Article 4 to apply in order to allow the contract to be performed under the conditions which would have existed had the monetary measures entailing the application of mca's not been taken.

With those examples one may contrast the case of an Italian importer contracting, before 19 December 1971, to buy goods for a price payable in dollars, but obtaining the necessary dollars after that date. He would get the benefit of the devaluation of the dollar and so, unless required to pay an mca, might be able to re-sell the goods profitably at a price below that aimed at the by common organization of the market. Even if he was already committed as to their resale, there would, in general, be no manifest unfairness in exacting mca's from him.

Thus, the application of the proviso requires in each case an investigation of all the relevant facts, and in particular of the currency of the contract and of the circumstances of its performance. In the present case, on the facts as stated to this Court by the Plaintiff, it would seem that the proviso should be applied so as to exclude the application of paragraph 1, but it will of course be for the Tribunale to decide as to that.

The questions in group A fall into two sub-groups, and I think it will be convenient if I deal first with the second sub-group, comprising questions A 4 and 5. These are both concerned with the meaning of the reference in the proviso to the performance of the contract.

Question A 4, if I may abbreviate it slightly, is whether that is a reference to the fulfilment by the importer of the obligation to pay the price in accordance with the terms of the contract. Question A 5 is whether, where payment of the price is made by means of an irrevocable banker's documentary credit, the contract is to be regarded as having been performed on the date of the advice to the seller of the opening of the credit in his favour or on the date when the price is actually paid to him.

Those questions, as the examples to which I have referred demonstrate, are somewhat beside the point. They reflect of course arguments put forward by the Plaintiff.

No doubt the reference in the proviso to the performance of the contract is, as was common ground, a reference, primarily at least, to the payment by the importer of the price of the goods. It is not, however, to be interpreted in any narrow or technical sense. It must be interpreted in the light of the purpose of the proviso. In every case the question must be whether or not, in fact, the contract was performed under the conditions that would have existed apart from the monetary measures that occasioned the introduction of mca's. In a case where the contract stipulated for payment under an irrevocable banker's documentary credit, the answer must depend to a large extent on the nature of the arrangements between the importer and the issuing bank, which may in their turn depend on provisions of the local law applicable to those arrangements. (There are indications in the observations of the Plaintiff and of the Italian Government that, in the present case, certain provisions of the Italian Civil Code may have been relevant). Where the credit was to be opened for a sum in foreign currency (as, in this case, dollars), the crucial date will be that upon which the rate of exchange determining the amount of the importer's liability to the issuing bank ruled.

I think that Your Lordships should answer questions A 4 and 5 accordingly.

So I turn lastly to questions A 1, 2 and 3.

It seems that, on 31 December 1971, 4 January 1972 and 9 February 1972 the Italian Government sent instructions, by circular, to the Italian Customs offices as to the application of the Community legislation on mca's. It was on the basis of those instructions that the Defendant exacted mca's from the Plaintiff on the importations here in question. No-one challenges the right of the Italian Government to put out circulars of that kind, having no legal effect.

On 15 November 1972, however, the Italian Government promulgated a decree (D.L. 15.11.1972 No 661), Article 20 of which provided that mca's should not be payable ‘in respect of goods which are the subject of commercial transactions concluded prior to 19 December 1971 even if they are cleared for final importation after 2 January 1972, provided that payment is made in currency other than US dollars or alternatively in US dollars covered by exchange guarantee or other clauses having the same effect’.

It seems that that decree was promulgated under Article 77 of the Italian Constitution, by virtue of which it had statutory force, and that, on 18 December 1972, it became Statue No 843. It is relied upon by the Defendant as against the Plaintiff in the proceedings before the Tribunale.

The Plaintiff contends that that Italian legislation (which I shall henceforth, for convenience, refer to as ‘Article 20’) is invalid. The grounds on which it does so are reflected in questions A 1, 2 and 3. Those questions are, shortly stated:

1.Whether Regulations No 974/71 and No 1013/71, the latter as amended by Regulation No 2887/71, permitted Member States to promulgate rules having statutory force, laying down specific criteria concerning the applicability or otherwise of mca's to contracts concluded before 19 December 1971, in order to give effect to the proviso in Article 4 (2) of Regulation No 1013/71.

2.If the answer to question 1 is in the affirmative, whether Article 20 is consistent with the terms of the proviso.

3.If the answer to question 1 is in the negative, whether the proviso is completely effective in itself and therefore to be interpreted as leaving it to the courts of Member States to decide in each case whether the contract was performed under the conditions to which it refers.

The Tribunale prefaces those questions with an indication that it asks them only on the assumption that the proviso ‘is still in force’. To that the answer is that the proviso remained formally in force until Regulation No 1013/71 was repealed by Commission Regulation (EEC) No 648/73 of 1 March 1973. Previously to that, however, Commission Regulation (EEC) No 2342/72 of 7 November 1972 had provided that exemption under Article 4 of Regulation No 1013/71 should apply only to products imported before a date to be fixed by each Member State for its territory or, at latest, 1 December 1972. Since a Member State could not, under that provision, abolish the exemption retroactively, it is clear that the exemption, coupled with the proviso, applied throughout the period during which the importations in the present case took place.

It is interesting to observe that, among the reasons given by the preamble to Regulation No 2342/72 for the abolition of the exemption, were that ‘the manner in which this exceptional provision has been applied has varied considerably from one Member State to another’ and that ‘it is extremely difficult to introduce controls to prevent abuses of this provision’.

Before this Court it was argued on behalf of the Italian Government (which was, in this, surprisingly to my mind, supported by the Commission) that Article 20 was ‘necessary’ for the interpretation and implementation of the proviso.

A copious line of decisions of this Court makes it clear that, whilst a Member State may lay down rules of an administrative or procedural character in order to give effect in its territory to the provisions of a Community Regulation, and may also prescribe sanctions for any breach of such provisions where Community law itself does not do so, a Member State may not legislate either so as to duplicate a Community Regulation or so as to purport to alter it. Nor, in the absence of specific an valid authority conferred on a Member State, either expressly or by necessary implication, by Community legislation, may that State by its own legislation purport to supplement a Community Regulation under the guise of interpretation or otherwise. (See Case 40/69 Hauptzollamt Hamburg-Oberelbe v Bollmann ‘the turkey rumps case’ [1970] ECR 69, Case 74/69 Hauptzollamt Bremen-Freihafen v Krohn, ibid. p. 451, Case 34/70 Syndicat national du Commerce extérieur des céréales v ONIC, ibid. p. 1233, Case 39/72 Commission v Italy [1973] ECR 101 (paragraphs 15 to 18 of the Judgment), Case 34/73 Variola v Amministrazione italiana delle Finanze, ibid p. 981, Case 131/73 Grosoli, ibid. p. 1555, Case 159/73 Hannoversche Zucker v Hauptzollamt Hannover [1974] ECR 121, Case 23/75 Rey Soda v Cassa Gonguaglio Zucchero [1975] ECR 1279 (which shows that the powers of the Commission to delegate legislative authority to the Member States are not unlimited), and Case 50/76 Amsterdam Bulb v Produktschap voor Siergewassen [1977] ECR 137).

Much argument, both written and oral, was submitted to us about the correct interpretation of Article 20. But this Court, on a reference under Article 177 of the Treaty, cannot interpret national legislation.

It is plain that Article 20, if, on its correct interpretation, it merely duplicated Article 4 (2) of Regulation No 1013/71, was invalid in the eyes of Community law. So also if it purported to alter that provision in so far as it applied in Italy.

Thus the only question can be whether Article 4 (2), read in its context, was such as to require or authorise Member States to legislate for its own interpretation. Clearly it did not do so expressly. Did it do so by necessary implication?

Despite the strenuous arguments presented to us on behalf of the Italian Government and of the Commission, I think not. Article 4 (2) was, as I have said, obscurely worded. But it was not beyond interpretation and application by a court. Indeed its nature was such that its interpretation by legislation in each Member State might well lead to its being interpreted differently in each of them. The best hope of achieving uniform interpretation and application of it throughout the Community lay in leaving the interpretation and application of it to the national Courts, armed as they were with the power and, in the case of some of them, obliged as they were, to refer any doubts they might have to this Court.

I am therefore of the opinion that, in answer to questions A 1 and 3, Your Lordships should say that the Community Regulations in question did not permit Member States to legislate with a view to giving effect to Article 4 (2) of Regulation No 1013/71, but that that provision had direct effect in each Member State so as to require the courts of that State to decide as to its application in any disputed case arising in that State.

On that footing question A 2 does not call for any answer.