DELIVERED ON 23 OCTOBER 1979 (1)

Mr President,

Members of the Court,

The three cases appearing on the causelist today were joined by a decision of 2 December 1977 to enable them to be heard and decided together. At the request of the applicant Scholten-Honig, which is anxious that certain data contained in the evaluation of its losses should not be revealed to the applicants in the two other cases, the Court ordered on 7 March 1979 that Case 143/77 should be disjoined from the other two cases.

Nevertheless, I think that these three cases may be dealt with today in a single opinion. That is because the only point really at issue at this stage in the proceedings is whether a sufficiently serious breach of rules of law by the defendant institutions, the prerequisite for liability on the part of an official institution, has occurred. At all events, in view of the restriction on the subject-matter of the oral proceedings, of which the parties were notified, there is no need as yet to examine the damage alleged to have occurred and the details thereof in a manner which might be prejudicial to the business interests of the applicant Scholten-Honig or of its business associates.

I have already given an opinion concerning these three cases on 20 June 1978. Moreover, the legal and economic questions which they raise are familiar from the reference for a preliminary ruling in Joined Cases 103 and 145/77 (Royal Scholten-Honig and Tunnel Refineries Ltd. v Intervention Board for Agricultural Produce, judgment of 25 October 1978, [1978] ECR 2037), in relation to which I also delivered an opinion on 20 June 1978 ([1978] ECR 2008). It will therefore be possible for me to refrain from giving an introduction to the common organization of the market in sugar and the imposition, in the context of that market, of a production levy on isoglucose, a liquid sweetener in competition with sugar, and for the sake of simplicity to refer the Court to the content of the above-mentioned opinion.

In my opinion on these three cases concerning liability for official acts I expressed the view that the applications should be dismissed as unfounded as the regulations imposing a levy on isoglucose, which is claimed to be the cause of the damage, were not illegal. In that regard I was able to refer to my exhaustive treatment of this question in the opinion on Joined Cases 103 and 145/77, which also dealt with arguments from the cases concerning liability for official acts.

The Court did not endorse this assessment of the production levy on isoglucose introduced by Regulation No 1111/77 (Official Journal L 134 of 28 May 1977, p. 4). In the judgment of 25 October 1978 the Court came to the conclusion that discrimination had occurred between isoglucose producers and sugar producers in connexion with the production levy, in so far as the levy was only applied to so-called B sugar whereas it was applied to the entire production of isoglucose, and both the guarantee of marketing at the intervention price and the export refunds were only available in respect of sugar. Even when for the sake of comparison reference was made to modern sugar factories producing considerable quantities of C sugar and paying a production levy of between 3.81 and 13.52 u.a. per 100 kg of sugar produced, it still had to be borne in mind that 60 % of the average burden imposed by the production levy was borne by the beet growers and that the sugar producers were also in a position to reduce the amount of the charge by limiting their production. The Court was therefore driven to the conclusion that there was a ‘manifestly unequal’ charge applied to isoglucose producers, which must be regarded as an infringement of the prohibition on discrimination in Article 40 (3) of the EEC Treaty; Regulation No 1111/77 was therefore invalid to the extent to which Articles 8 and 9 thereof imposed a production levy on isoglucose of 5 units of account per 100 kg dry matter for the period corresponding to the sugar marketing year 1977/78.

It was clear from that decision that the applications concerning liability for official acts could no longer be dismissed on the grounds I suggested. In these proceedings, therefore, the parties were invited by a letter of 21 November 1978 to specify their alleged losses more precisely and to give their observations on the causal connexion between those losses and the actions of the Community institutions and to comment, taking into account the judgment in Joined Cases 83 and 94/76, 4, 15 and 40/77 (Bayerische HNL Vermehrungsbetriebe GmbH & Co. KG and Others v Council and Commission, judgment of 25 May 1978 [1978] ECR 1209), on the question whether the damage alleged to have been sustained was such as to entail liability under Article 215 of the EEC Treaty.

In their pleadings, supplemented at the request of the Court, the applicants claim that the prerequisites for a claim based on liability for official acts under Article 215 of the EEC Treaty have been fulfilled and they support their claims with the following details:

—The applicant Amylum, which did not pay the production levy, claims that it was compelled instead to take out bank guarantees which involved it in expense. Moreover, as a result of the production levy it limited its production of isoglucose and produced instead other products made from starch. This means that its profits shrank and it also incurred losses owing to the fact that it was forced to limit its production of starch, the basic material for isoglucose. It has also incurred costs in defending its interests before the Belgian authorities. It claims that all this — taking into account an appropriate rate of interest — amounts to BF 106612456. I shall return later to the reduction of this sum in the subsidiary pleadings.

—The applicant Tunnel Refineries which also did not pay the production levy, pleads that because of this levy it took up production of isoglucose on a lesser scale than originally planned. Because of this starch was also produced on a lesser scale and some of it had to be processed into other products. Losses were also incurred for the following additional reasons: higher costs per unit of production were incurred in making isoglucose; the applicant's starch factory could not be used to its full capacity; investments were needed for the different method of processing starch and for altering production equipment; the manufacture of other products was less profitable and the replacement starch which was manufactured but which could not be disposed of straight away had to be stored. The result of this, although no figures could be given for the alleged loss of customers and the forfeiture of favourable buying conditions, and taking into account appropriate interest up to 30 November 1978, is a total loss of £ 1020150.

—Lastly, the applicant Koninklijke Scholten-Honig which paid the production levy — in relation to isoglucose manufactured in an experimental factory — and has not yet had it reimbursed, claims that the levy rules forced it to close down its isoglucose production for good. As a consequence investments in experimental equipment, which in any case operated at a loss and which also entailed losses owing to staff dismissals and under-utilization of the maize starch factory, must be written off. Money spent on research and management costs in respect of isoglucose, including sales promotion, disbursements for legal aid and the financial consequences of contracts with outside companies concerning acquisition of patents and enzyme supplies must be counted as lost. The same goes for the sale it was forced to make of an isoglucose factory well into the construction stage at an unfavourable price and losses were also incurred owing to the fact that it would not be possible for the factory to be a source of profit in future years. The total value of all the losses is held to amount as at 18 January 1979 to HFL 147520000.

In opposition to this the defendant institutions rely principally on the argument that the introduction of the production levy on isoglucose does not represent ‘a sufficiently serious breach of a superior rule of law for the protection of the individual’. They also cast doubts on the causal connexion between the levy and the losses said to have been sustained and consider that under no circumstances can compensation be provided for all the consequences alleged to have occurred, but that on the contrary if it is to be assumed that the Community is liable the duty to compensate must be restricted to damage which is certain.

In order to make an assessment of this tangle of dispute the following points, which do not raise any particular difficulty, may first be made in brief.

(a) The issue in the proceedings is solely the question whether the adoption of Regulation No 1111/77 introducing the production levy on isoglucose infringed a superior rule of law in such a manner as to make the Community liable to pay compensation. On the other hand it is not necessary to examine the problem of how the conduct of the Commission in preparing these rules should be judged, whether that provided sufficient cause for the parties concerned to make certain commercial decisions and whether the consequences thereof have a sufficient causal nexus with the possibly unlawful conduct of the Commission.

In making this comment I have in mind explanations supplied by the applicant Scholten-Honig after delivery of the preliminary ruling in Cases 103 and 145/77 in supplementary written observations which apparently refer to events which took place prior to the adoption of Regulation No 1111/77. At this point it is not necessary to go further into the question whether this kind of alteration or expansion of the grounds of the application is to be considered admissible, which the defendant institutions deny by arguing that the application itself mentions only liability based on the adoption of Regulation No 1111/77. What really counts is that the representative of Scholten-Honig made it clear in the oral procedure that such an alteration or expansion of the grounds of the application is not really what is being sought. The applicant referred to the period of time prior to the adoption of this regulation only in order to show that the management of the undertaking was already considering the necessary measures at that point. However, the relevant decisions were made only after Regulation No 1111/77 had been adopted and therefore even Scholten-Honig is concerned only about a duty to provide compensation for damage arising from the introduction of the production levy and not from the preparatory procedures.

(b) No-one contests the point — and I do not think it can be contested — that the introduction of the production levy applicable to isoglucose constitutes a measure of economic policy adopted on the basis of a relatively wide margin of discretion. Measures had to be taken within the framework of the common agricultural policy and in accordance with the aims of Article 39 of the EEC Treaty to stabilize the sugar market which was subject to large surpluses; for details of this I refer the Court to my opinion in the above-mentioned reference for a preliminary ruling. Because the surpluses were increased by the new sweetener isoglucose, for which there were no production restrictions, its manufactures too were expected to help to pay for the cost of reducing the surpluses by means of a levy which was designed to compensate for price advantages due to the organization of the sugar market; at the same time it was hoped to restrain the apparently runaway development of this sweetener, which seemed likely to increase the surpluses even more.

It is clear from the consistent case-law of the Court that legislative measures of this kind involving choices of economic policy cannot give rise to a claim for compensation for damage suffered by individuals unless a sufficiently serious breach of a superior rule of law for the protection of the individual has occurred (cf. for example Case 5/71 Aktien-Zuckerfabrik Schöppenstedt v Council, judgment of 2 December 1971 [1971] ECR 975 and Joined Cases 54 to 60/76, Compagnie Industrielle et Agricole du Comté de Lohéac and Others v Council and Commission, judgment of 31 March 1977 [1977] ECR 645).

(c) It is clear from the preliminary ruling delivered in Joined Cases 103 and 145/77, which ruled that Regulation No 1111/77 was invalid because it offended against the prohibition on discrimination, that the special pre-requisite mentioned above for claims for compensation for damages is fulfilled to the extent to which it refers to the infringement of a rule for the protection of the individual. I might also refer the Court in this respect to the judgment in Joined Cases 83 and 94/76, 4, 15 and 40/77 (HNL), in which it was emphasized that the prohibition against discrimination in Article 40 (3) of the EEC Treaty, the importance of which in the context of the Treaty is obvious, is designed to protect individuals.

In order to make an assessment of this tangle of dispute the following points, which do not raise any particular difficulty, may first be made in brief.

1.In order to make an assessment of this tangle of dispute the following points, which do not raise any particular difficulty, may first be made in brief.

It has long been unclear what exactly is to be understood by ‘a sufficiently serious breach of a superior rule of law’.

In company with my predecessor in office, who, in his opinion in Joined Cases 63 to 69/72 (Wilhelm Werhahn Hansamühle and Others v Council and Commission, judgment of 13 November 1973 [1973] ECR 1229), held that a flagrant disregard of a legal provision was necessary, I was first of the opinion that this condition was only fulfilled by grossly improper conduct (opinion in Cases 56 to 60/74, Kurt Kampffmeyer Mühlenvereinigung and Others v Council and Commission, judgment of 2 June 1976 [1976] ECR 711), if — as was stated in the opinion in Case 153/73 (Holtz and Willemsen GmbH v Council, judgment of 21 February 1974 [1974], ECR 675) — there has been a particularly clear breach of legal provisions or obvious and serious disregard of them. Learned writers criticized this interpretation as unconvincing and not wholly appropriate — I refer to the discourse by Ernst Werner Fuss concerning the case-law of the European Court of Justice on Community liability for unlawful regulations, which is to be found in the Von der Heydte Commemorative Volume, p. 173 et seq.

Mr Fuss emphasizes that measures relating to economic policy allow a large margin of discretion, in which the evaluation of economic policies, assessments of the current situation, development forecasts and the selection of priority objectives play a part, and he is of the opinion that in such circumstances only the widest possible limitations should be imposed on that discretion; thus in deciding whether a sufficiently serious breach of a rule of law has occurred, the test is whether the Community institution assailed may be seen to have exceeded or otherwise abused this wide-ranging discretion in shaping its policies. He considers that support is to be found for this in the earliest judgments concerning the point, for instance in the fact that in the judgment in Joined Cases 56 to 60/74 the question of arbitrary discrimination was important, whereas certain inconsistencies in the rules were not held to amount to a wrongful use of discretion, or in the circumstance that the misuse of discretion also occupied first place in the discussions in Case 74/74 (Comptoir National Technique Agricole v Commission, judgment of 14 May 1975 [1975] ECR 533).

It should be clear by now that in its interpretation of the formula quoted the Court has in fact largely followed the comments made by Fuss, but that in its application certain factors which are indicated in my attempts to find an interpretation have a rôle to play. Since the HNL judgment mentioned above we know that the problem of defining a sufficiently serious breach of a superior rule of law calls for the following considerations to be taken into account:

The basic principle is that where legal provisions are the result of decisions adopted in the sphere of economic policy, only exceptionally and in special circumstances can the public authorities be liable. It is important, first — and this relates to the defect inherent in a provision alleged to have caused damage — that in circumstances where the legislature is allowed a wide margin of discretion, as in the formulation of agricultural policy, liability can only arise if the limits of this discretion have been manifestly and gravely disregarded. On the other hand the effects which follow from the contested provision must be taken into account. In this connexion there is a rule ‘that individuals may be required … to accept, within reasonable limits, certain harmful effects on their economic interests … without being able to obtain compensation from public funds’. The point in the decided case, moreover, was that the effects of the measure in question had only a limited impact on the price of animal feedingstuffs as a factor in the production costs; in this regard the price increases which were found to exist were comparable to price increases which arose owing to fluctuations in the world market price for animal feeding-stuffs. Finally, mention was also made of the requirement that the effects of the measure in question on the profitearning capacity of the applicant undertakings should be related to the ‘bounds of the economic risks inherent in the activities of the agricultural sectors concerned’.

It is in the light of these criteria, which have in the meantime been applied and partially clarified in the maize gritz and quellmehl judgments of 4 October 1979 (Joined Cases 64 and 113/76, 167 & 239/78 P. Dumortier Frères and Others v Council, Case 238/78 lreks-Arkady GmbH v Council and Commission, Joined Cases 241, 242, 245 to 250/78 DGV Deutsche Getreideverwertung und Rheinische Kraftfutterwerke GmbH and Others v Council and Commission, Joined Cases 261 and 262/78 Interquell Stärke-Chemie GmbH & Co. KG und Diamalt AG v Council and Commission) that the present case must be judged. This also makes it clear — I say this with reference to the question raised by Amylum in the supplementary pleadings, whether in the event of the breach a fundamental principle of law a sufficiently serious breach within the meaning of the formula quoted should not automatically be assumed — that the importance of the rule which has been breached is not the only significant factor, but that rather in every case there must be a supplementary factor giving rise to the gravity of the breach. That may be inferred already from the fact that in the HNL judgment the Court of Justice emphasized on the one hand the importance of the prohibition against discrimination which had been infringed, whilst on the other hand, over and above that, it examined the effects of the contested measure and also pointed out that the limits on the exercise of the discretionary power must have been manifestly and gravely disregarded.

In examining the conditions which must be fulfilled in order to be able to speak of a sufficiently serious breach of a superior rule of law I turn my attention first to the effects of the contested measure, that is to say, of Regulation No 1111/77.

In this connexion the applicants refer, first, to the amount of damages they claim, mentioned earlier, and compare them to the sums which were contested in the HNL proceedings, which were considerably smaller. Secondly, they rely on the statement in the HNL judgment to the effect that the measures which were there under consideration affected very wide categories of traders and point out that, in contrast to that case, in this case only a small group of isoglucose manufacturers, requiring no further description, is affected.

I am convinced that these two considerations cannot in themselves lead to any decisive conclusion.

This is certainly true of the second-mentioned point. That the present case concerns a whole branch of industry leads one to conclude that the decisive criterion cannot be the fact that this branch of industry is so structured that the manufacturing plants are to be found in the hands of just a few undertakings. It would also be a misinterpretation of the HNL judgment to infer from it that where the group of parties affected is small, the effects will always be decisive for the purposes of the formula of a sufficiently serious breach. In fact, however, all that that judgment says is that ‘this measure affected very wide categories of traders … so that its effects on individual undertakings were considerably lessened’. Thus a relationship is established between the number of those affected and the type of effect. This does not exclude the possibility, however, that even where a small group is affected the effects may be small, and that naturally the converse may apply. Irrespective of the number of those affected, therefore, the extent of the effects must always be taken into account.

As regards the amount of damages claimed, on the other hand, it cannot be used as if it were a clearly established figure. Numerous objections have been raised against the amount of the claim, in fact; these cannot be automatically rejected as irrelevant and may have to be examined in detail.

I would remind the Court of the observations supplied in the course of the oral procedure at the request of the Court of Justice as to the question what damage may in fact be considered as calling for compensation in the case of a wrong arising from a legislative measure. In this regard it may be important — and here too the judgments in the maize gritz cases are relevant — to know whether the damage is direct, certain and specific; consideration should also be given to the fact — in view of the judgment in Case 74/74 [1976] ECR 797 — whether lost profits must in principle be excluded, at least where the interest which has been injuriously affected is not one protected by the law, and thought must be given to the point whether this affects costs incurred for legal aid, as is the case in certain national legal systems.

Thus I might refer to various objections which have been made to the various items in the calculation of the alleged damage. It was said, for instance, that investment for alternative products could not be counted as an economic disadvantage because it was of lasting value. On the subject of calculating the loss of profit due to the reduction in isoglucose production it was claimed that this had been wrongly calculated on the basis that isoglucose was not subject to any levy, and that this caused the applicant Amylum to reduce its claim for damages in the alternative to BF 55726569. In this respect, also, it was stated that not all the cost factors had been taken into account; these include the reduction in costs, owing to the more intensive utilization of the plant for producing starch. In addition it has been claimed that the applicant Tunnel Refineries wrongly assumed that the production target originally aimed for would have been reached at once. Lastly, doubts were cast on the head of damage referred to by Tunnel Refineries as ‘increased stockholding costs’.

A whole series of objections concerns the causal connexion.

Among these is the claim that the production of isoglucose had already been made unprofitable by the withdrawal (which is not open to doubt) of the production refund and could not in any event cope with the imposition of an additional levy, in whatever form, in particular if in Belgium such production is equated with sugar for the purposes of taxation; thus it is clear that the production levy was not the original cause of the re-organization of production or, at least, that isoglucose would not have produced any profit even if it had been freed of any levy and even if transport costs were left out of the calculation.

Moreover, as early as 1975, that is to say prior to the introduction of the production levy, Tunnel Refineries had decided to increase their capacity less than was originally foreseen.

Next, the complete halt in production in the case of the applicant Scholten-Honig — as the examples of Tunnel Refineries and Amylum show — is, it is claimed, certainly not a direct consequence of the introduction of the production levy, so that all that it brought in its train — the writing-off of investments, even in experimental factories, the loss of future profit — must be left out of account.

Lastly, it is claimed that the applicants are guilty of contributory negligence.

Thus it is said that it must have seemed risky to make large investments in the manufacture of isoglucose at a time when the sugar market was favourable and at a time when there were production refunds available, although the strict controls governing this market, one might even say the rigidity of the market, were known and no-one could be certain that the refunds would be maintained.

Tunnel Refineries, in particular, it is claimed, was over-hasty in its decision to make alternative products, since the company, wrongly, did not take seriously the proposal by the Commission to leave the production levy on isoglucose at five units of account, which was in fact adopted in May 1978. Also relevant here, it is claimed, is the fact that just two days prior to the preliminary ruling in Joined Cases 103 and 145/77 investments for plant conversion were approved. In this respect the disadvantage which would have arisen owing to payment of the production levy on the production capacity, which was in any case not fully utilized, during the period from November 1977 to October 1978 is stated to have been appreciably less than the losses claimed in the application.

Lastly, the claims submitted by Scholten-Honig met with the objection that it must have appeared particularly risky to construct a special factory for the production of isoglucose instead — as was the case with the other undertakings — of adapting and extending the plant used for the production of starch. In the case of Scholten-Honig it may also be assumed that the difficulties which led them, here too, to adopt over-hasty decisions, were due essentially to other causes — too little capital of its own, poor profits from the production of starch. Above all, it is said that they were guilty of contributory negligence with regard to the arranging of the contracts concerning the acquisition of the patent rights and the sale of the factory in Tilbury, at a price well below the construction price.

The possibility cannot therefore be excluded that considerations of this kind — subject to liability on the part of the Community — may lead to a considerable reduction in the damages claimed, so that, under certain conditions, as the example of Amylum alone has already shown, much of their credibility will disappear. However, we do not need to make a definitive examination of this point; as the file on the case now stands, that is to say without further inquiries and perhaps evidence from experts, this would in fact be very difficult. In fact it may be thought that the HNL judgment in so far as it states that the effects of an unlawful measure are the definitive criterion, should be understood differently. Accordingly, consideration need not be given to all the possible disadvantageous effects of a contested rule, even those which are not immediate; rather, in deciding the question whether a sufficiently serious breach of a rule of law has occurred one need only look at the direct effects on production costs and profitability.

(b)If such a principle is to be applied in the present case, the point of departure must be that the contested production levy accounted for roughly 15 % of the value of the isoglucose. It amounted in fact to 15 % of the intervention price for sugar, to which, as we know, the market price for sugar was very close owing to the existing surpluses, whilst the price of isoglucose, as being a partly interchangeable product, in its turn depended on that.

Of course it must be admitted at this point that this relationship is hardly justification itself for saying that the production levy had purely ancillary effects. If I understand the HNL judgment aright, however, that is not the only point to be considered, for these effects must also be regarded in the light of the economic risks which are known to be inherent in this kind of activity. Thus, according to the explanations furnished by the defendant institutions, which appeared to me to be convincing, one must consider first the price fluctuations on the relevant market and secondly the special risks proper to that market, which arise from the rules to which it is subject under the common organization of the sugar market.

(aa)As far as the first point is concerned the figures originally supplied by the Commission and the Council concerning the development of the world market price for sugar during the period 1974 to 1977 — with values of around 103 units of account per 100 kg on the one hand, and approximately 12 units of account per 100 kg on the other hand — cannot be considered as decisive because isoglucose, which according to the case-law is to be equated with Community sugar, is not produced for the world market. It is equally certain, however, that the result cannot depend solely on the fluctuations in the world market price for maize, the raw material for making isoglucose, quoted by the applicants, or on the development of the Community price for that product, which is subject to much narrower limits, precisely because the price for isoglucose is not determined by these factors alone, but also by the make-up of the sugar price.

If on the other hand one takes a look at the development of sugar price in the Community, that is to say, on the market to the risks of which the applicants are exposed, at the time in question, the picture that emerges is quite striking, starting with the shortage years 1974 and 1975 in which under the influence of high prices on the world market prices rose above the intervention price to the vicinity of the threshold price or — in some Member States — even higher, whilst on the other hand in surplus years such as 1978 the market price was based on the intervention price. Thus it is possible to speak of price fluctuations of the same order of magnitude as the contested production levy, or even — if we compare the intervention price of 1974 to the threshold price of 1978 — of the order of magnitude of approximately 14 units of account per 100 kg. Compared to this the production levy can certainly not be considered as exorbitant; in fact it is more or less in line with the normal risks present in the sugar market.

The same may also be said of the second observation made by the defendants, which relates to the possibility of alignment with the production levy applicable to B sugar. At the time in question this levy was limited to 30 % of the intervention price for sugar, and thus amounted to 9.85 units of account per 100 kg. But the losses incurred in financing the exportation of surplus sugar would have justified a levy amounting to 19.5 units of account per 100 kg. In the case of such large amounts as these it is not inappropriate to speak of a real risk; indeed in times of surplus sugar production the levy no longer needed to be restricted. In the case of such a levy on B sugar, however, and the spreading of such a levy over the total production of A and B sugar the result would have been a burden of 3.54 units of account per 100 kg on the sugar producer in the economic year 1977/78. Accordingly, on a strict comparison of charges the same charge would have been permissible for isoglucose, that is to say, we may speak of a corresponding risk for isoglucose almost of the same order of magnitude as the contested production levy. So there, too, there would be an appropriate relationship between the levy which was introduced and risks inherent in that sector of the economy.

In my opinion an assessment of the effects of the disputed measure in the light of the economic relationships, such as the HNL judgment appears to suggest, does not lead to the conclusion that the Community institutions have been guilty of a sufficiently serious breach of rules of law.

The question remains, however, whether in preparing and adopting Regulation No 1111/77 the Community institutions have manifestly and gravely disregarded the limits on the exercise of their very wide powers in the sphere of agricultural policy.

(a)In this connexion the applicants rely partly on the statement in the preliminary rulings in Joined Cases 103 and 145/77 to the effect that the production levy on isoglucose is a ‘charge which is manifestly unequal’.

I find this in itself insufficient, however. The defendants rightly point out that in the judgment in Case 114/76 (Bela-Mühle Josef Bergmann KG v Grows-Farm GmbH & Co. KG, judgment of 5 July 1977, [1977] ECR 1211) the measures adopted in Regulation No 563/76 were held to be manifestly disproportionate and that this was not held to be sufficient in the related HNL judgment for the claim to compensation for damage; in fact it was said that aggravating circumstances must be present, which — and this led to dismissal of the application — were lacking.

(b)I think it would be appropriate in this connexion to remind the Court once again that it emphasized in the much-quoted HNL judgment that liability for wrong in the form of a legislative enactment can only be incurred by way of exception and in the presence of special circumstances. That means that very strict conditions are required to be fulfilled for the presence of the factors which make the breach serious; all the circumstances of the case must be taken into account, not merely one aspect, such as discrimination in the present case, and it must be shown, if there is to be any question of liability, that there has been a misuse of discretion verging on the arbitrary, in other words a decision which is totally unsupported by objective considerations or in which such considerations have had no influence.

(aa)The basis for the examination required in this connexion should be a comparison of the charges imposed on sugar as against isoglucose, a factor which came to the fore in Joined Cases 103 and 145/77 and which on that occasion even gave me grounds for holding that the objection of discrimination against the producers of isoglucose vis-à-vis the manufacturers of sugar was unjustified. In fact I still think it is right — and the preliminary ruling delivered in Joined Cases 103 and 145/77 says nothing to the contrary — to compare the position of the isoglucose manufacturers with that of the modern, favourably placed sugar factories, which, because of more advantageous manufacturing conditions, not only exhaust their B quotas, but also manufacture C sugar in considerable quantities. At that time at least, that is to say at the time of the adoption of Regulation No 1111/77, this could not be considered inappropriate, and therefore in the present connexion a comparison with the new rules adopted in 1979 after the preliminary rulings had been delivered, on the basis of which the applicants conclude, as the Court knows, that formerly they were quite manifestly discriminated against, cannot be decisive.

If, in the comparison which I take to be appropriate, account is taken of the fact that part of the production levy on B sugar is passed on to the beet growers by means of a lower minimum price for sugar beet — although the Court of Justice in the proceedings for a preliminary ruling pointed out that that adjustment had not been made it was not too difficult to carry out later and in fact it is referred to in the pleadings of the defendant institutions in these proceedings — then it will be found in fact that these sugar producers had roughly the same charges to bear as the isoglucose producers, that is to say, between 1.5 and 5.4 units of account per 100 kg, which comes to a weighted average of 5 units of account per 100 kg. Nor do I think — as some of the applicants do — that this calculation should be further adjusted in view of the fact that in the sugar year 1977/78 the price paid for C beet is stated to have been considerably lower. In the first place the Council was fully able, when it issued the contested regulation, to take into account the values, which were already known, relating to the previous financial year, and in the second place we cannot discount the Commission's argument — so far uncontested — that there was no uniform price level and that in some cases the price paid for B beet also was higher than the minimum price envisaged.

On the basis of a straightforward comparison of the charges imposed, therefore, there is no doubt that the complaint of discrimination against the isoglucose producers is not justified.

sugar factories to be used as a relevant standard for comparison. In their case, that is to say in the case of undertakings which also produce C sugar in appreciable quantities, that possibility was in fact of purely theoretical significance; in their case it was also possible to calculate roughly, on the basis of the production of C sugar to be sold on the world market, how the limitation on production under the common organization of the market in sugar, which is not available for isoglucose, operates on the Common Market by means of the quota system.

Basically, then, the only significant factor left as regards discrimination is the fact that for isoglucose there were no market guarantees. However, whether this is grave enough to ground a complaint of serious discrimination is doubtful in view of the fact that isoglucose clearly was able to find a market without too great difficulty.

Moreover, as I have already emphasized, this factor should not be examined in isolation, if the HNL judgment is rightly interpreted. Its value should be assessed in the context of all the surrounding circumstances which it was appropriate to take into account at that time, and only then, in particular after an examination of the question whether there were not sound reasons for delaying the introduction of absolute equality of treatment between isoglucose and sugar and whether considerations of agricultural policy did not justify temporary prejudice to the interests of isoglucose, will it be revealed whether in fact it is appropriate to speak of a serious misuse of discretion on the part of the Community institutions.

In this context I would refer to the observations of the Council concerning the fact that isoglucose has existed on the market virtually only since 1976 and that this product, in relation to which little confirmed knowledge was available, was at the stage of preparing for production, which was expected to expand rapidly. Nor can one ignore the fact that considerable difficulty was encountered in comparing the structure of this new type of industry with that of the long-established sugar industry. In addition there were at the time great difficulties in establishing complete equality with sugar as regards the introduction and determination of production quotas, without which market guarantees would be unthinkable in the surplus sugar market. That gave good grounds for postponing settlement of the problem, especially as before 1980 the sugar market had in any case to be reorganized. As against that it is not sufficient to rely on the fact that after the preliminary ruling was delivered in Joined Cases 103 and 145/77 a quota system was introduced within a relatively short time for isoglucose as well, as from the sugar year 1979/80 (cf. Regulation No 1293/79 of 25 June 1979, Official Journal L 162 of 30 June 1979, p. 10, and the implementing Regulation No 1630/79 of 27 July 1979, Official Journal L 190 of 28 July 1979, p. 38). It must also be borne in mind, however, that when this quota system was being prepared the situation had developed further, so that it was possible to take account of actual production and not merely production capacity, which was difficult to gauge. Nor must we overlook the fact that even now — as pending cases show — this quota system is clearly encountering great difficulties.

Not least, I would remind the Court also that at the time the Council was adopting a decision within the sphere of the agricultural policy which it may have considered should not be postponed — in the face of rising sugar surpluses — and that this brought about, as so often in this sphere, a conflict of aims. But to my way of thinking it was not quite inappropriate and irrelevant if the Council, faced with such difficulties, allowed a certain discrimination, hard to pinpoint, against isoglucose on grounds of agricultural policy and evinced a certain Community preference in its decision. This was influenced by the fact that isoglucose could practically only be made from maize, that maize is storable and can be processed in many different ways in widely diversified large-scale manufacturing plants and that the maize used for making isoglucose is principally obtained from non-member countries, because Community production falls far below requirements and also Community maize is apparently less suitable for such a purpose. In the second place it had to be borne in mind that there was a surplus production of sugar beet, which cannot easily be replaced by other products and that sugar beet — which is very perishable — can only be used for producing sugar.

If all these factors are taken into account, as they must be in adopting decisions of this type which are subject to discretion, then even if it is impossible to deny that there has been a certain discrimination against isoglucose, though certainly not flagrant discrimination, it is difficult to hold after careful evaluation of all the aspects that in adopting the regulation which has been declared to be invalid the Community institutions were guilty of a misuse of powers verging on the arbitrary.

On the basis of the examination up to now it cannot therefore be said that a sufficiently serious breach of a superior rule of law has occurred. Thus an essential prerequisite for recognition of a claim to compensation on the basis of illegality arising from a legislative act is lacking.

The response to the claims made by the applicants will be no different — if I may say so directly — if they rely on breach of rules of law other than those which were dealt with in the preliminary ruling in Joined Cases 103 and 145/77.

The representative of Tunnel Refineries mentioned this when he pointed out that the defendant Community institutions may be accused of not only infringing the prohibition against discrimination but also failure to observe the principle of proportionality and — because of the lack of transitional measures in the regulation under scrutiny — of breaching the principle of the protection of legitimate expectation. I do not need now to go into that in more detail. I refer to my detailed treatment of these aspects in the opinion in the above-mentioned reference to the Court for a preliminary ruling which led me to the conclusions that no such infringements have occurred. In this regard I maintain what I said earlier (the Court did not need to go into this point in detail in judging the validity of Regulation No 1111/77); in particular I do not care to support the view of Tunnel Refineries that the findings made in the judgment in Case 74/74 ([1975] ECR 533 et seq.) concerning different circumstances may be applied as they stand to the present case: I think that the view that a finding of manifest discrimination implies that the principle of the protection of legitimate expectation and the principle of proportionality have been infringed is mistaken.

If this conclusion is accepted, there is no longer any need — because now the ingredient of illegality is lacking — to consider the equally disputed question whether the principles invoked by Tunnel Refineries are superior rules of law for the protection of the individual, and there is no more need to examine this problem than there is to examine the other, namely, whether it is possible to speak of a sufficiently serious breach.

Similarly, I do not need to examine the question of fault and the problem which may arise in this connexion, whether in the case of illegality arising from a legislative act liability is only present if a serious fault on the part of the authorities has occurred.

In this connexion I merely wish to point out that in my opinion it is in principle extremely difficult to maintain that where the fundamental prerequisite for liability based on illegality arising from a legislative act is present, the serious breach in the sense described above, such liability can be escaped. Moreover, if fault is to play a rôle, all that need be said concerning the applicants' argument on this point, namely that the Community institutions failed to conduct a detailed and careful examination of the situation of the isoglucose producers, especially in so far as manufacturing costs and their taxable capacity are concerned, is that such an inquiry was not indispensable. The fact is, that it was not considerations such as these which occupied first place — and rightly — in the preoccupations of the Community institutions, but rather the question whether the levy to be imposed on isoglucose corresponded more or less to that on sugar, because the main point was that of equality of treatment with the sugar manufacturers.

Thus all that remains is to deal briefly with the question of the costs in the proceedings.

According to the first paragraph of Article 69 (2) of the Rules of Procedure the costs are to be paid by the unsuccessful party. Under paragraph (3) of that article, however, the Court may order that the parties pay their own costs in whole or in part where the circumstances are exceptional. In the opinion of the applicant Tunnel Refineries there are grounds in the present case for ordering that the costs be so paid. In its argument it relies on the judgment in Case 153/73 (Holtz & Willemsen GmbH v Council, judgment of 21 February 1974, [1974] ECR 675) in which, despite the fact that the application was dismissed, it was ordered that the applicant had only its own costs to pay because there were sound reasons for bringing the dispute to the Court for clarification. It refers also to the judgment in Case 74/74 [1976] ECR 806 where, although the claim for compensation was rejected, a similar decision as to costs was given on the ground that the Court had earlier held that the Commission's conduct was capable of creating liability. It is in fact possible to do the same in the present case, having regard first to the extreme complexity of the facts to be judged in the dispute, and secondly to the fact that in the proceedings for a preliminary ruling to which reference has been made, the Court declared Regulation No 1111/77 to be invalid.

In conclusion, therefore, I propose that the claim for compensation should be dismissed as unfounded and that each party should be ordered to pay its own costs.

(1) Translated from the German.