OPINION OF MR ADVOCATE-GENERAL GAND

DELIVERED ON 29 JANUARY 1970 (*1)

Mr President,

Members of the Court,

By an application made under Article 169 of the Treaty of Rome the Commission of the European Communities asks you to rule that the Republic of Italy, ‘by failing promptly to pay to exporters the refunds on products coming under the common organization of the market established after 1 July 1967’, has failed to fulfil an obligation under the provisions of the Community regulations establishing a common organization of the agricultural markets.

It must immediately be said that this case appears to me to be a delicate one; thus, before considering the arguments of the parties, I should like to recall briefly the reasons for and the content of the Community provisions which, according to the Commission, the Italian Republic has failed to observe.

The implementation of the agricultural policy involves the establishment of a Community market within which prices are guaranteed to producers and are protected by a common customs barrier separating that market from the world market on which prices are in general lower than European prices. It is thus important that the stabilizing machinery provided for in Article 40 of the Treaty should come into play in trade with third countries. With regard to exports, for example, refunds make up the difference between the prices on the world market and those in the Community and make it possible for Community exporters to operate on a competitive footing on the world market.

This system only gradually emerged. In its initial stage — that of a gradual alignment of markets — the payment of refunds and the fixing of their amounts were left to the discretion of the Member States, which were then reimbursed on the basis of what is known as the lowest average refund.

Nevertheless the system had of necessity to change on the transition from the gradual alignment of the market to the common organization of a single market. This transition took place, for example, on 1 July 1967 in the case of cereals, eggs, poultrymeat and pigmeat, on 1 September 1967 with regard to rice, on 1 July 1968 with regard to sugar and on 29 July 1968 with regard to milk products. A full Community system of refunds thus came about. Each of the basic regulations of the Council on the products which I have indicated confers on the Commission, acting in accordance with the opinion of the Management Committee concerned, the duty periodically to fix the amount of the refund. The refund is the same for the whole Community but it may be varied according to the destination. It is granted at the request of the exporter. It is paid when proof has been produced that the products have been exported from the Community; where the rate is varied according to the destination of the exported products, proof must be furnished that the product has reached the destination for which the refund was fixed.

Regulation No 1041/67 of the Commission of 21 December 1967 (OJ 1967, Special Edition, p. 323), which entered into force on 1 February 1968, lays down more precisely the detailed rules for the application of those provisions for all the products subject to a single price system. It specifies what is to be understood by export from the geographical territory of the Community and by ‘date of exportation’; it lays down the model of the export certificate and indicates the supporting documents required if the refund is varied according to the destination. Finally, it provides that the Member States may pay the exporter in advance all or part of the amount of the refund as soon as the customs export formalities are completed, provided that certain guarantees are given.

It is clear that the system thus established obliges the Member State in whose territory the customs formalities were completed to pay the refund fixed by the Community authorities; similarly, it implies the exporter's right to collect this refund on the double condition that he claims payment of the refund within the period fixed by Regulation No 1041/67 and furnishes the appropriate proof that the export has left the geographical territory of the Community or that it has reached its destination. The Italian Republic does not and never has disputed this.

II

What the Commission alleges against it and what it considers as a failure to fulfil an obligation under the Community regulations establishing the common organization of the agricultural markets is the failure of the Italian Republic to pay the refunds promptly. It is this delay in payment which justifies the application of the procedure under Article 169. In fact, one is concerned with regulations which, as such, are binding and directly applicable in all the Member States, and the detailed rules of which have been fixed by the Council and by the Commission with sufficient clarity for their practical application merely to require the States to adopt administrative measures which can be taken within very short periods. The Commission states that this has occasioned no difficulty for the other States. In Italy, on the other hand, there have been persistent delays the duration of which it enumerates and to which I shall return later. This has caused serious difficulties in the administration of the Community market, as a refund has a different economic effect depending on whether it is paid quickly or after a long delay. It is also harmful to Italian exporters who are obliged to seek credit at high rates pending the reimbursement of the sums to which they are entitled. Finally, it entails risks of distortion since those exporters are encouraged to export through ports in other States such as Marseilles or Rotterdam.

The Commission has maintained this view constantly throughout the discussions which it had with the Italian authorities before it made its application. In a letter of 27 February 1968 its Representative wrote to the Minister for Agriculture that according to the information in his possession the refunds had not yet been paid in Italy ‘with regard to any product coming under the single market system exported after 1 July 1967’, which does not seem however to have been entirely true if reference is made to the figures which the Commission supplied at your request. He declared furthermore that he was of the view that it would be possible for the Italian Government ‘swiftly to take the measures necessary for a proper application of the Community provisions’.

The Minister replied to this on 22 April 1968 that a Decree Law of 20 February 1968 contained basic provisions intended to make available the refunds provided for by the regulations and had released 99000 million lire to meet the expenses arising in 1968. Furthermore, ministerial circulars were to lay down the administrative procedures to allow exporters to receive the payments in advance referred to in Article 9 of Regulation No 1041/67. This was dealt with in the Ministerial Decree of 24 April 1968.

Those proceedings were still unofficial. But the situation was changed when by letter of 12 July 1968 the Commission decided to initiate the procedure of Article 169 of the Treaty. In fact, as far as it could see refunds had only then been paid in respect of very small quantities of the products subject to the single market system. It quotes as an example a firm exporting wheat flour which was owed 2367 million lire for the period from 1 July to 30 November 1967. According to the Commission, the delay thus caused in payment of the refunds constituted an infringement of the provisions of Article 7 of Regulation No 139/67 on cereals and the similar provisions in the other sectors subject to the single market, and it called upon Italy to submit its observations within a period of one month. Then, when no reply was received, on 30 January 1969 it delivered a reasoned opinion couched in terms almost identical with the application at present before you. Here it is stated in particular that the letter of 22 April 1968 from the Italian Government confirms the failure to pay the refunds from 1 July 1967 and that this situation was not significantly altered after the Commission sent its letter of 12 July 1968. This letter is worded in the usual way, inviting the Italian Republic to take the ‘necessary measures’ within a period of two months which might be prolonged ‘so far as is necessary for the observations of the parliamentary procedures required by the national laws in force’.

If I have reviewed at some length the course of the proceedings out of court, this is in order to emphasize that the Commission's complaint relates essentially to the delay occurring in practice in disbursing sums the payment of which is laid down by Community provisions. At no time has it been said that an Italian legislative or administrative provision by hindering this payment in law or in fact is contrary to the regulations on the common organization of the markets. The ritual request to take the necessary measures may equally well be understood as referring to quicker treatment of claims or instructions given for this purpose to the departments or to amendments to be made to provisions governing the procedure for payment.

III

How does the Italian Government reply to this argument?

This appears to be the first occasion on which you have had to give a ruling on a question of this nature. Until now it has always been alleged against the Member States that they had either brought into being or continued legislation considered incompatible with the Treaty or with its implementing provisions. Since legal measures were concerned, the problem could be viewed as purely legal. In order to find whether there had been a failure to fulfil an obligation, it was generally a question of interpreting the Community provision and considering whether the national measure was contrary to it. The solution to the problem might be difficult to reach, but it only required methods of reasoning already familiar to a court and no place was left for considerations of fact.

Nevertheless, the obligations of the Member States are not restricted to ensuring that their legislation is compatible with the Treaty and the regulations. It is generally the States which are charged with the practical implementation of Community provisions; they might be entrusted with various tasks and, as in the present case, with the payment of benefits. Failure or delay in performing such tasks may constitute a failure to fulfil obligations and thereby involve Article 169; to hold otherwise would paralyse the operation of the Community. But a delicate problem of appraisal may be raised if a provision does not prescribe a definite period of time for the completion of the task entrusted to the Member State, above all if this task involves the repetition of various actions, the payment of several benefits: involuntary or short delay is excusable, whilst repeated or prolonged delays on the contrary appear to come under Article 169. Extreme caution must be exercised here, as a number of reasons, not all the fault of the Member State, may explain its apparent inertia and it is always a delicate matter to claim to judge from afar the functioning of its services.

This appears to be the first occasion on which you have had to give a ruling on a question of this nature. Until now it has always been alleged against the Member States that they had either brought into being or continued legislation considered incompatible with the Treaty or with its implementing provisions. Since legal measures were concerned, the problem could be viewed as purely legal. In order to find whether there had been a failure to fulfil an obligation, it was generally a question of interpreting the Community provision and considering whether the national measure was contrary to it. The solution to the problem might be difficult to reach, but it only required methods of reasoning already familiar to a court and no place was left for considerations of fact.

Nevertheless, the obligations of the Member States are not restricted to ensuring that their legislation is compatible with the Treaty and the regulations. It is generally the States which are charged with the practical implementation of Community provisions; they might be entrusted with various tasks and, as in the present case, with the payment of benefits. Failure or delay in performing such tasks may constitute a failure to fulfil obligations and thereby involve Article 169; to hold otherwise would paralyse the operation of the Community. But a delicate problem of appraisal may be raised if a provision does not prescribe a definite period of time for the completion of the task entrusted to the Member State, above all if this task involves the repetition of various actions, the payment of several benefits: involuntary or short delay is excusable, whilst repeated or prolonged delays on the contrary appear to come under Article 169. Extreme caution must be exercised here, as a number of reasons, not all the fault of the Member State, may explain its apparent inertia and it is always a delicate matter to claim to judge from afar the functioning of its services.

The dispute before us shows the delicate nature of this appraisal and the need to exercise great caution. The Commission complains that the Italian Republic has failed to pay the refunds ‘promptly’. The term is vague. In fact the Community regulations do not prescribe a definite period within which the payments must be made. Indeed they provide, as I have said, that the refund shall be paid upon proof of the export's leaving the geographical territory of the Community or of reaching its destination, and payment in advance may be made as soon as the customs formalities are completed. Those provisions, however, leave a considerable discretion to Member States to determine which documents constitute proof of those various operations; consequently it is not surprising that the decisions of States in these matters display differences in the relative speed with which the refunds are paid.

Contrary to the Commission's view, in this case the Italian Republic has never admitted the alleged delay, and to read such an admission into the letter sent on 22 April 1968 (that is, before the pre-litigation stage) by the Minister for Agriculture is to stretch its meaning. Thus in its rejoinder the Commission is obliged to support its argument by various documents which I shall now consider.

I must say at the outset that these documents do not seem to me very persuasive.

—First, there is nothing to support what the rejoinder terms facts published in Italy in the specialist press. There is only an extract from a journal of 6 November 1968 referring to another publication which further alludes to information from Brussels to the effect that delays in excess of a year sometimes occur in the Italian State's payment of refunds for cereals.

—Secondly, the ‘difficulties revealed by the industrial representatives of the producer Member States in the Management Committees’ are invoked. This concerns a complaint by the representative of the rice-milling industry about the difficulties encountered in obtaining payment of refunds in Italy.

—The copious information received by the Commission's departments from Italian exporters is also invoked, without however supplying further details.

—On the other hand, it is more relevant that two actions were initiated against the Italian Minister for Finance by two unnamed companies to recover considerable, though unspecified, sums payable as refunds. I do not dispute the existence of those actions but only two have been cited and since the competent court has not ruled that they are well founded they can scarcely be employed to prove the defendant's alleged delay.

—Finally, the Commission invokes in support of its case the requests for payments in advance made by the Italian Republic for the accounting periods 1967-1968 and 1968-1969 which prove the non-payment of the refunds for certain products and partpayment for others. I shall not dwell on these documents which we shall come across again later in another form. I shall also leave aside the replies given by the Member States, especially by the defendant, at an investigation made in March 1967 by the Commission on the delay in paying the refunds. This investigation relates to the period prior to 1 July 1967 which is outside the dispute.

It appears that the Court found this evidence as unconvincing as I did since, after the opening of the oral procedure, it requested detailed information from the parties on the progress made by the Italian authorities in paying the refunds from 1 July 1967 to 1970. This information made it possible to calculate the exact extent of the delay alleged against the defendant and to see whether it had put a new system into operation.

You were given two replies.

One, from the Italian Government, relates to the amount of payments made during the periods 1 July 1967 to 30 June 1968, 1 July 1968 to 30 June 1969 and 1 July 1969 to 31 December 1969, but gives comprehensive figures which do not specify the date of the exportations which led to those payments. During the oral procedure the Commission expressed its dissatisfaction with the schematic manner in which this evidence was presented in that it did not give the clear picture which would have emerged from a comparison of the claim for payment from all the exporters with the payments made; those are factors with which it must remain unacquainted so long as the Member State does not reveal them. But it must not be forgotten that it is for the applicant to provide proof of the delay which it wishes the Court to find. The Commission claims that such proof is further substantiated by the reply which it has given you in the form of a table of payments of refunds drawn up on the basis of the six-monthly requests for payments in advance lodged by the Italian Republic.

Let us examine this table more closely.

It sets out in four columns the refunds paid for each product and for each of the four six-monthly periods between 1 July 1967, the date of the first common organizations, and 30 June 1969. For the first six-monthly period in 1968 it shows the total amount of refunds for each product and the proportion pertaining to the operations of the foregoing six-monthly period; for the second half of 1969 it gives the total amount and the part pertaining to the period from 1 July 1967 to 30 June 1968 thus indicating a delay of a year; for the six-monthly period in 1969 the total amount and the portion pertaining to the same period from 1 July 1967 to 30 June 1968 thus indicating a delay of 18 months.

This document indeed constitutes a laudable attempt to follow as precisely as possible the progress of the refunds and delays occurring in connexion with them. Nevertheless I do not think, after considering the table in detail, that the conclusions which the Commission draws from it can be admitted without reservations.

—In the first place, it should be noted that during the second half of 1967, the first period considered, payments were made. They were inconsiderable which is normal considering that the first common organizations were established on 1 July 1967, but they were made despite the Commission's allegation in its letter of 27 February 1968 to the effect that no payment had yet been made at that date.

—During the first half of 1968 the refunds amounted to 6841 million lire of which only 5 million related to operations in the preceding six-monthly period.

With regard to the second half of 1968, the payments amounted to 10442 million lire of which 4044 million pertained to the period from 1 July 1967 to 30 June 1968 and the Commission considers that this latter figure indicates a delay of one year. I cannot agree with this as the information regarding the dates when the exports were effected and the refunds paid are insufficiently precise to justify such conclusions. Let us suppose for example that an export was effected on 1 May 1968 for which a refund was paid on 1 August 1968, that is, after three months; it would only appear in the column for payments made for exports in the period from 1 July 1967 to 30 June 1968 which is held to indicate a delay of one year. If we now pass on to the first half of 1969, we find 6950 million lire of which 1169 million pertained to operations in the first half of the 1967/1968 period and are thus held to reflect a delay of 18 months. The same reservations on this method of calculation may be made here as in the case of the preceding six-monthly period, but in addition we find that of the said 1169 million lire, 718 million pertain to refunds for milk products. I find this quite incomprehensible as milk products were only brought under the single market system on 29 July 1968 and consequently there cannot be any compulsory refunds for those products, the only ones referred to in the application, for the period 1967 to 1968. We should, no doubt, understand the table, drawn up on the basis of requests for payments in advance from the Italian Republic, as including refunds made optionally under the earlier system which might indeed be reimbursed by the Community. But this finding deprives the figures supplied by the Commission and the consequences which it draws from them of much of their force.

What must be concluded from this?

A general impression may perhaps be gained from the file to the effect that the refunds were not paid immediately, but what is the reason for this delay? Was it caused by a lack of credits, by the inertia of the departments or merely by the difficulties inherent in initiating machinery the complexity of which is reflected by Regulation No 1041/67? It is indeed difficult to say. Nor do I consider very illuminating the comparisons which the Commission claims may be made with the dispatch displayed by the other Member States; the data supporting those comparisons is too old and moreover lacks figures. There thus remains the information which the applicant gave in response to the Court's request; but far from supporting its argument, this information rather appears to show that it is impossible to draw really firm conclusions from it.

Consequently the outcome seems to me clear. Whilst an abnormal delay, longer than a reasonable period, may constitute a failure to fulfil an obligation under the Treaty, for you to give a judgment to this effect as you are empowered by Article 171, the Commission must provide you with the certainty, not merely impressions, of the delay. To censure the course of action of a Member State, with the wide margin of error involved in appraising a course of action, is a responsibility not lightly to be undertaken. For my part I do not find the Commission's argument sufficiently persuasive for me to recommend you to undertake such a responsibility.

I am of the opinion that the application of the Commission of the European Communities should be dismissed and that the costs should be borne by that institution.

* * *

(*1) Translated from the French.