(after the re-opening of the oral procedure)

DELIVERED ON 17 JUME 1980 (1)

Mr President,

Members of the Court,

This Court has taken a most unusual step and re-opened the oral procedure in these cases, on which I gave my opinion on 11 March of this year, requesting the plaintiffs in the main actions, the French and Italian Governments, the Council and the Commission to submit written observations on the questions set out as an annex to the Order of this Court of 26 March 1980.

The plaintiffs in the main action, the French Government and the Commission have availed themselves of this opportunity to give their views in writing. The Council also participated in the oral procedure.

During the hearing the Court was told that certain competitors of the plaintiffs in the main actions have instituted proceedings before the Finanzgericht [Finance Court] Hamburg against the reductions in the compensatory amounts subsequently made by the Commission. I can do no more than take note of the fact that this action has not yet been referred to the Court for a preliminary ruling and state that the German Government, which could have represented the interest shown by the German producers in the solution to the questions submitted, has not considered it appropriate to intervene at this stage of the procedure, although it was notified of the Order of this Court.

Since this Court has also given me the opportunity to state my views I shall reply to certain criticisms and make the following additional remarks.

I —

The Commission wishes to correct a misunderstanding which, it states, appears to have misled me in my opinion. It had stated in its written observations that “the definition of secondary products with a view to their classification in the Common Customs Tariff and their yields are a matter of dispute between the German and French industries” and that “France has always argued that flour for fodder is to be classified exclusively under tariff subheading 23.02 A 1(b)”. Further on, it stated that “the examples given at (a), (b) and (c) show that there are no uniform views as to the definition of the products with a view to their classification in the Common Customs Tariff and their yields (the situation in the other Member States produces still different results)”. The Commission added that “in view of that contradictory situation, the departments of the Commission consider that flour for fodder comes half under tariff subheading 23.02 AI (a) and half under tariff subheading 23.02 A 1(b)”. The plaintiffs in the main actions for their part confirm that flour for fodder is classified under heading 23.02 AI (b) by the French administrative and customs authorities.

I thought that it was possible to infer from this that there were “differences of opinion as to the classification” (“divergences dans le classement”) of the secondary products in the Common Customs Tariff and in the introduction to the questions asked by this Court it was stated that “the Commission replies ... that there are, moreover, differences of opinion as to the classification” (“la Commission répond ... qu'en outre il y a des divergences dans le classement”). Unless I have failed to understand the French language I hold to my view that the observations of the Commission were quite unambiguous.

The Common Customs Tariff lays down a criterion: if the starch content of a product does not exceed 35% by weight it must be classified under subheading 23.02. AI (a); if it exceeds that percentage it must be classified under subheading 23.02. A 1(b).

II —

The Commission notes that after a reduction of 6.2% in the compensatory amount applicable to maize starch and of 10% in the compensatory amount applicable to secondary products obtained from starch the ceiling for compensatory amounts on processed products in relation to the compensatory amount on the basic product is “in practice” reached.

The following points should be noted:

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These reductions were only made on 28 May 1979, even though the regulations whose validity the Court is required to appraise were adopted before that date;

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The Commission justifies the exclusion of germ from the “calculation of the incidence” — even though, rightly or wrongly, compensatory amounts are still applicable to these products — by the consideration that “such secondary products are practically not marketed”. Nevertheless it declares itself ready, “if the Court declares the application of processing coefficients to be excessive, to contemplate their abolition in the case of germ”;

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Unlike the milling industry, even after such reductions, the “ceiling”, or if preferred, the “principle of neutrality” is only achieved approximately in the meal and starch industries. That finding is based on an appraisal made not in respect of a single Member State but of all Member States with depreciated currencies, in particular the United Kingdom. If, as the Commission states, it is necessary in appraising the incidence of the ceiling to do so in respect of all Member States it is likewise appropriate to bear in mind the fact that (see p. 2861) in that respect or in trade with non-member countries the actual compensation is the result of the sum of the positive and negative amounts;

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It is doubtful whether, in calculating the compensatory amounts applicable to products processed from maize, failure to take into account the monthly increases in the intervention price of maize benefits the plaintiffs in the main actions which are established in a country with a depreciated currency. Nor indeed is that factor taken into account in calculating the compensatory amount on the basic product and the dependent relationship between the amount applicable to that product and the amounts applicable to the derived product is such that where that advantage disappears in relation to the derived products producers are at the same time able to obtain supplies of the basic product, even home-produced, at a better price.

III —

The Court further requested the Commission to give it fuller details of its argument that “the logic of the agri-monetary system implies that the basis for calculating the compensatory amounts applicable to maize starch can never exceed the intervention price of the maize constituting the raw materials”.

1)

The Commission confirms first af all that it simply took over the coefficients adopted in the contested regulations from the system of levies laid down in Regulation No 2744/75 of the Council. It also confirms that it had regard, in fixing the coefficients applicable to derived products, to the “economic protection necessary to stabilize the prices of such products”. Thus, although the Council states once more that there is no “necessary” connexion between its regulation and the provisions laid down by the Commission, the latter maintains that there is an “unavoidable” link between the compensatory amounts and the levy. Finally it states that it “refined” the system of conversion coefficients used in calculating the compensatory amounts “on the basis of extremely complex economic and technical factors”.

2)

In calculating the compensatory amounts on maize groats and meal the Commission adopted as its basis the intervention price of maize. It explains that it could not take into account the production refund — although that subsidy is “as regards traders in that sector the measure which has the greatest influence on the supply price they must pay for maize” — since that refund was abolished by Regulation No 665/75 of the Council of 4 March 1975. It was only “legally and economically” possible to take that production refund into account after Council Regulations Nos 1125/78 and 1127/78 of 22 May 1978 had re-introduced, from 19 October 1977, production refunds on meal and groats used in the brewing industry (and for the manufacture of pre-gelatinized starch intended for baking): in the judgments of the Court of 19 October 1977 in the Ruckdeschel and Others cases, and in the Moulins et Huileries de Pont-à-Mousson and Others cases ([1977] ECR 1753 and 1795) this Court in fact considered that it was incompatible with the principle of equality to grant a production refund on certain products and not on others with the same marketing outlets. It must nevertheless be added that this Court, in its judgment of 4 October 1979, Dumortier and Others, virtually re-introduced production refunds for the period from 1 August 1975 to 1 October 1975 by ordering the Community to pay to a certain number of maize processors amounts equivalent to production refunds on gritz.

3)

The Commission recalls that in addition to technical factors there are factors concerning agricultural policy in the system of levies and it produces in support of its explanations a statement of the reasons on which a proposal for a Council regulation dating from 1964 was based. It is stated there that “where several processed products are obtained from the same cereal the variable component of the product considered as the principal product has hitherto been calculated on the basis of the quantity of raw material presumed actually to have been used, whilst the variable component of other products (for example germ and bran) was calculated in terms of the protection considered necessary to stabilize the prices of that product. These arrangements are economically justified since the relationship between the prices of the products obtained from the same cereal depends on commercial policy or the market situation rather than on the incidence of the cost of the raw material of each of the products”. Accordingly, this proposal considered “that it was appropriate to provide for a reduced levy in the case of imported maize and rice bran with a starch content in excess of 35% whose use as animal fodder is ensured by denaturing it”.

4)

The Commission then states that “according to the precepts of the agrimonetary arrangements defended by it and upheld by the Court, the monetary compensatory amounts to be introduced must be limited to the amounts ‘strictly necessary’ to compensate for the incidence of monetary events on the prices of agricultural products covered by intervention arrangements and only where such incidence would cause disturbance in trade in such products within the Community and with non-member countries”. Although in principle the use of the intervention price as the basis for calculating compensatory amounts enables such amounts to be fixed at a minimum level, the Commission recalls that within the organization of the market in cereals the existence of the production refund may, in some cases, cause the market price of starch to be lower than the level resulting from the intervention price of maize. For this reason, for the purpose of calculating the compensatory amounts on the products of the starch industry it took into account not the intervention price “which no longer performs its normal function in determining the market price” but the threshold price which constitutes the most significant price exerting an influence on the market in maize, a product which is in short supply in the Communty.

5)

The Commission, in a working paper issued by its departments which was submitted to the Council on 26 and 27 March 1979 and produced by it as an annex to its observations in the Société Havraise Dervieu Delahais case, admits that “it is clear that in principle the compensatory amounts applicable to derived products must not exceed those applicable to the basic product”. The result of taking into account the intervention price after deduction of the production refund can never be to overcompensate in relation to the actual situation of the market. If in the actual economic situation that intervention price no longer performs its normal function of guiding the market the solution is to alter or abolish the production refund in accordance with the proper procedure and not to provide compensation by means of compensatory amounts; although the latter form part of the common agricultural policy they are not sacrosanct.

IV —

I have two remarks to add with regard to the limitation of the consequences of any declaration of invalidity which may be made. First, the Court is not required, within the framework of the questions submitted to it, to rule directly on the application of Community law to these cases or to other similar cases. Secondly, it is necessary to take account of the judgment of this Court of 12 June 1980 in the Express Dairy Foods case. That is a closely-related matter since it relates to compensatory amounts on powdered whey; in that judgment the Court refused to apply by analogy the second paragraph of Article 174 of the Treaty.

So far as the remaining matters are concerned, I refer entirely to my opinion of 11 March 1980.

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(1) Translated from the French.