ON 7 OCTOBER 1980 (*1)

Mr President,

Members of the Court,

I —

Pursuant to Article 5 (2) (b) of Regulation No 729/70 of the Council of 21 April 1970 on the financing of the common agricultural policy, the making-up of the accounts presented by the Member States in respect of expenditure for the 1973 financial year financed by the European Agricultural Guidance and Guarantee Fund, Guarantee Section, led to the adoption by the Commission on 12 October 1979 of decisions addressed to each of the Member States.

Each of the decisions addressed to the Federal Republic of Germany, the Italian Republic and the Kingdom of Belgium has been attacked by its addressee, but for different reasons.

The present dispute concerns an action for annulment brought by the Kingdom of Belgium against Decision No 79/893/EEC adopted by the Commission in application of Article 8 of Regulation No 1723/72 of the Commission of 26 July on making up accounts for the European Agricultural Guidance and Guarantee Fund, Guarantee Section, a decision which was communicated to it on 18 October 1979, in so far as it does not recognize as chargeable to the Fund a sum of BF 29008562 in respect of the payment of varied export refunds on milk and milk products.

That sum represents the difference between the amount of the varied refund fixed in advance, referred to in Article 17 (2) of Regulation No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products and the lower amount of the refund calculated on the basis of the lowest rate ruling on the day of completion of the customs export formalities.

By virtue of Article 6 (2) of Regulation No 876/68 of the Council of 28 June 1968, laying down general rules for granting export refunds on milk and milk products and criteria for fixing the amount of such refunds, the additional portion relating to the varied refund is to be paid only “provided it is proved that the product has reached the destination for which the refund was fixed”.

The applicant claims that it has made that payment in accordance with Article 8 (1) of Regulation No 1041/67 of the Commission of 21 December 1967 on detailed rules for the application of export refunds on products subject to a single price system; it contends that the Commission has misconstrued that provision and, secondly, that it showed a lack of care or was in breach of the principle of the protection of legitimate expectation.

II —

Before going on to examine those two submissions I should explain the system with regard to the proof required for the grant of refunds on export to nonmember countries.

The refund could be varied according to the destination should “the world market situation or the specific requirements of certain markets make it necessary” (Article 4 of Regulation No 876/68). In that case the refund was paid if it was proved that the products had been exported out of the Community, that they were of Community origin (save in cases where the provisions of Article 7 of Regulation No 876/68 applied), and that they had reached the destination for which the refund had been fixed (Article 6 (2) of Regulation No 876/68).

This additional requirement was likewise provided for by Article 4 (1) of Regulation No 1041/67 in respect of the basic refund :

“In certain cases, by reason of difference between the rate of the refund and that of the levy, or by reason of the nature of the exported products or of export markets, Member States may require, as a condition for payment of the refund, proof not only that the product has left the geographical territory of the Community, but also that the product in question has been imported into a third country and, where appropriate, proof of the conditions under which it was imported.”

The provision of proof that the product has reached the destination for which the refund was fixed is governed by Article 8 (1) of Regulation No 1401/67 as amended by Article 4 of Regulation No 499/69 of the Commission of 17 March 1969:

“For the application ... of the first subparagraph of Article 6 (2) of Regulation No 876/68 ..., the party concerned must submit one copy of the transport document and, at the discretion of the competent national authorities, one or more of the following documents certifying arrival in the country of destination or for the use in question:

A copy of the customs or port document made out in the country of destination, a certificate issued by the official services of one of the Member States established in that country, a certificate by an international control and surveillance company. The competent national authorities may recognize other documents as equivalent and may require additional forms of proof. They shall forthwith so inform the Commission which shall without delay inform the other Member States thereof.”

Other provisions waive the necessity for that proof to be furnished if it cannot owing to force majeure (Article 4 (3) of Regulation No 1041/67) and where a transaction is the subject of a declaration eligible for a refund not exceeding 200 units of account; even in the latter case the transport document was required and the transaction had to offer reasonable certainty that the products in question would reach their destination.

III —

The applicant's first submission is that an equivalent document within the meaning of Article 8 (1) of Regulation No 1041/67 is constituted by a certified copy of the original of a cif freight prepaid bill of lading issued by a shipping agent who is a member of a sea transport association recognized by the Belgian State (in this case, the Federation Maritime of Antwerp, a non profitmaking association), which warranted that the goods would not change destination en route; that arrangement also applied in the case of exports via another Member State and to “sea/land” bills of lading showing the final destination of the goods.

Since the Community system of varied refunds is designed to cover the costs connected with transport, and a bill of lading signed by an agent recognized by the Fédération Maritime of Antwerp does guarantee that the costs of transport have been paid in advance, such a document, the applicant says, is just as good as the documents normally required. The purchaser who has paid the freight from departure and who, as a general rule, is established at the place of destination, has a serious interest in ensuring that the goods should be delivered safely. The bill of lading not only guarantees loading “for the destination in question”; most often it constitutes a delivery document for the goods and in virtually all cases guarantees that the transaction will be properly concluded.

The Commission replies that even if it indicates the place of destination and bears the words “freight prepaid” a bill of lading constitutes a mere transport document whose purpose and effect is to discharge the seller from the risks to which the goods may be exposed from the moment they pass over the ship's rails at the port of arrival; even if it may be relied on as between all the parties interested in the cargo on the one hand and between those parties and the insurers on the other hand, on no account can it have any probative value, as regards the public authority, as to the goods' arrival at their destination.

Once he has become owner of the goods the purchaser may resell them in order to take advantage of fluctuations in the market; it might be to his advantage to have the cargo rerouted or transhipped in order to reship it to a port different from the one stated in the bill of lading. The advantage of doing so might outweigh the fact that the freight was prepaid all the way to the destination. Involvement of a shipping agent approved by an association constituted under private law, no matter how trustworthy, is limited to strengthening the probative force of a bill of lading as a credit document; it in no sense guarantees that the goods have been shipped to their destination.

Bearing in mind the amount of public fund involved and the possibility of fraud I, too, think that it is not possible to make do with approximate means of proof. The ninth recital in the preamble to Regulation No 1041/67 contains an indication to just that effect:

“... where the rate of the refund 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.”

On 27 October 1971 the Court declared (Rheinmühlen, [1971] ECR at p. 837) that “exports to third countries” within the meaning of Regulation No 19 of the Council of 4 April 1962 on the progressive establishment of a common organization of the market in cereals “presupposed that the goods were offered for sale on the market of a third country, that is to say, that they must at least have been put into free circulation there” (paragraph 7); “it was for the Member States to determine independently the evidence required to establish that export to a third country had taken place, provided that they did not accept insufficient proof” (paragraph 8).

In regard to the application of Articles 2 and 3 of Regulation No 729/70 the Court held on 7 February 1979 (Germany v Commission [1979] ECR at p. 384, paragraph 8):

“That strict interpretation of the conditions under which expenditure is to be borne by the EAGGF is necessary, moreover, in view of the objective of Regulation No 729/70.

In fact the management of the common agricultural policy in conditions of equality between traders in the Member States requires that the national authorities of a Member State should not, by the expedient of a wide interpretation of a given provision, favour traders in that State to the detriment of those in other States where a stricter interpretation is applied.

If such distortion of competition between Member States arises despite the means available to ensure the uniform application of Community law throughout the Community it cannot be financed by the EAGGF but must, in any event, be borne by the Member State concerned.”

On the same day the Court added, in the judgment in (France w Commission ([1979] ECR 321 at pp. 339 and 320, paragraph 28):

“As Community law now stands the procedure for the discharge of the accounts ... serves to determine not only that the expenditure was actually and properly incurred but also that the financial burden of the common agricultural policy is correctly apportioned between the Member States and the Community and in this respect the Commission has no discretionary power to derogate from the rules regulating the allocation of expenses.”

The construction of Article 4 (1) of Regulation No 1041/67, in the version in force in 1971, and of Articles 4 and 6 (2) of Regulation No 876/68 has since been expressly laid down by the Court's judgment of 2 June 1976 in (Eier-Kontor [1976] ECR at p. 783, paragraph 6):

“If it sufficed for the goods simply to be unloaded to qualify for payment of the refund at a higher rate, the raison d'être of the system of varying the refund,”

which the Court stated in paragraph 5 takes place by reason of the desire to take account of the peculiar characteristics of each import market on which the Community wishes to play a part, “would be disregarded and abuse would be made possible to the detriment of Community interests.

It is therefore necessary for the goods to have been cleared through customs and put into free circulation at the destination.

Only objective criteria can be taken into account in answering the question whether goods have reached the market at their destination.”

Freight is not the only determining factor: the characteristics of the products exported or of the export markets play a part in the advance fixing of the rate of refund and it may happen that the shipping charges are lower than the supplementary portion relating to the varied refund.

According to the actual words of Article 8 (1) of Regulation No 1041/67 the documents to be furnished at the discretion of the authority concerned must, apart from the transport document properly so called, be made out not at departure but in the country of destination and must either certify arrival in that country “or for the use in question”, that latter expression referring to the transactions mentioned in Article 2 (victualling vessels or aircraft, supplying international organizations and armed forces) in which case proof of the completion of customs formalities may be a sensitive matter.

Although, therefore, a “freight prepaid” bill of lading may be an indication that the goods have arrived at their destination, it is not an absolute guarantee. The applicant's reply to the written questions put to it by the Court has not to any degree made it possible to ascertain the extent of the warranty obligation, incumbent upon a member of the Fédération Maritime of Antwerp or on that association, as to the goods' arrival at their destination.

IV —

By its second submission the applicant contends that in accordance with the last sentence of Article 8 (1) of Regulation No 1041/67 it duly notified the Commission by letter of 17 September 1968, confirmed by a telex message of 26 November 1971, that the national authorities were accepting as an equivalent document a certified true copy of an original “cif freight prepaid bill of lading” issued by a shipping agent who was a member of the Fédération Maritime of Antwerp.

Likewise in accordance with Article 8(1) of Regulation No 1041/67 the Commission then informed the other Member States of that arrangement by a communication of 10 January 1969.

Furthermore, the applicant argues, on 2 December 1975, on the clearance of the accounts for the financial years 1971 and 1972, the Commission accepted the Belgian arrangement; it did so again on 20 December 1977 in regard to the financial years 1967 to 1970. That attitude created a “legitimate expectation” on the part of the applicant as to the validity of its proof arrangement. In those circumstances the defendant may not challenge, several years later, the validity of the documents accepted in Belgium.

Contrary however to what the representative of the Kingdom of Belgium states, Article 8 (1) of Regulation No 1041/67 did not in any way give the Commission at that time the power to harmonize the equivalent documents accepted by the Member States as means of proof.

It was only under Regulation No 2110/74 of the Commission of 26 July 1974, amending Regulation No 1041/67, that the right to recognize “equivalent documents” was removed, experience having shown that the provisions of Articles 4 and 8 needed to be strengthened and made more specific. In view of the abuses and frauds at the Fund's expense the regulation now requires proof of importation and entry into free circulation in the country of destination and it may be furnished only by production of the customs document, the copy thereof, or by a photocopy certified by the competent authority to be a true copy.

The production of “equivalent documents” is no longer accepted unless, by reason of circumstances beyond the trader's control or having regard to the particular situation in the country of destination, the control copy cannot be furnished, although the goods have left the geographical territory of the Community or reached their destination.

However, it is apparent from the papers before the Court that the Belgian arrangement had been discussed at a joint meeting of experts on the application of Regulation No 1041/67 in connexion with the Group on Trade Mechanisms which took place on 25 and 26 January 1972 in Brussels. Point 2 of the agenda for that meeting concerned the amendment of Article 8 of Regulation No 1041/67 “for the purpose of avoiding any misunderstanding”: it is difficult to imagine a more official context.

From the recording of the discussions at that meeting it is apparent that the Chairman indicated with some emphasis for the sake of the Belgian delegation that “the present wording of Article 8 quite clearly specifies that the payment of the refund in the event of variation requires proof of arrival at destination and not potential proof”. He also formally denied that the Fund had ever agreed to treat a “freight prepaid” bill of lading as constituting proof of arrival at destination and of unloading.

Moreover, the Belgian delegation acknowledged that the Chairman had been perfectly clear and “agreed that a bill of lading does not provide proof that goods have arrived at their destination”.

At the meeting on 4 October 1973 of the Management Committee for Milk and Milk Products at Brussels, at which Belgium was actually represented by a delegate who had attended the experts' meeting on 25 and 26 January 1972, the Commission again pointed out that in the case of the grant of varied refunds the Member States had to require evidence to show that goods had been put into free circulation in the country of destination.

Even if the summary account of the meeting on 25 and 26 January 1972 was not so explicit in this regard, as Advocate General Capotorti indicated in his opinion in the case of Netherlands v Commission [1979] ECR 245 at p. 301, the Belgian Government should have sought written information from the Commission about the problem with which it was concerned. Even if it is accepted that the Belgian authorities proceeded in good faith on an incorrect construction of Community law they did not demonstrate the required care and prudence in applying the rules, although they had been clearly forewarned by the Commission.

In those circumstances it seems to me that there is no question of being able to speak of frustration of legitimate expectation. The payment of refunds prior to the financial year 1973 on the basis of “freight prepaid” bills of lading, at a time when the Fund carried out only random checks rather than inspections on the spot and when the amount of varied refunds in the milk products sector (except for cheese) was much smaller, could not therefore create any legitimate expectation in the mind of the applicant, at any rate after the meeting of January 1972.

It is my opinion that the application should be dismissed and that the costs be borne by the Kingdom of Belgium.

—

(<span class="note"> <a id="t-ECRCJ1980ENA.0800355001-E0001" href="#c-ECRCJ1980ENA.0800355001-E0001">1</a> </span>) Translated from the French.