OPINION OF ADVOCATE GENERAL

delivered on 22 September 1992 (*1)

Mr President,

Members of the Court,

1.In this application, the Commission asks the Court to declare that the Portuguese Republic, by failing to adjust progressively the monopoly in ethyl alcohol of agricultural origin and non-agricultural origin and the monopoly in the acquisition and supply of wine spirits for use in the making of port wine, has failed to fulfil its obligations under Article 208(1) of the Act of Accession.

Article 208(1) of the Act of Accession requires the Portuguese Republic to adjust progressively, from 1 January 1986 (the starting date of the transitional period), State monopolies of a commercial character so as to ensure that by 1 January 1993 no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of the Member States. The third subparagraph of that provision states that the Commission is to make recommendations, that is to say non-binding measures, as to the manner in which and the timetable according to which the ‘progressive adjustment’ is to be carried out.

By virtue of that power, the Commission addressed to the Portuguese Republic on 8 October 1987 a recommendation concerning the adjustment of the State monopoly of a commercial character in alcohol vis-à-vis the other Member States (*1) in which it asked Portugal to create quotas for ethyl alcohol of agricultural origin and non-agricultural origin and for wine spirits for use in the making of port wine. The recommendation also includes very specific provisions on the setting of the size of the initial quotas and on the rates by which the quotas should increase each year until 31 December 1992, the date when the transitional period expires.

2.Having said this, I would observe in the first place that the Commission, albeit challenging the Portuguese Republic, persistently and backed by abundant detail, with evidence designed to prove that the liberalization of trade in products subject to the monopolies in question has not yet been commenced, seems to have ‘forgotten’ to specify, or least has not clearly indicated, the substance of the duty imposed by Article 208(1) which the Portuguese Republic is alleged to have failed to fulfil.

As I have just mentioned, Article 208(1) of the Act of Accession, similarly to Article 37(1) of the Treaty, imposes a duty to achieve a very specific result (elimination of all discrimination), which has to be fulfilled (a) by the end of the transitional period and (b) by means of the progressive adjustment of monopolies of a commercial character.

3.However, it is plain — given that the transitional period expires on 31 December 1992 and that the Commission's reasoned opinion addressed to the defendant, requiring the latter to comply with it within one month of notification, was issued on 16 February 1990 — that the Commission's charges against the Portuguese Republic do not relate (nor can they relate) to the obligation to achieve a particular result which is imposed by the relevant provision, but rather to the method which the Portuguese has chosen in order to achieve the relevant result of progressively adjusting its State monopolies. It is, however, essential to identify the substance of that obligation in order to verify that the Portuguese Republic is in fact in breach of Article 208(1) as is claimed.

3.Even before we consider the adjustment process initiated by the Portuguese Government, it is necessary therefore to establish what is to be understood by ‘progressive adjustment’ and, in particular, whether the Member States are under very specific duties as to what they should do during the transitional period in effecting that adjustment.

Article 208(1) does not expressly define the substance of the concept of ‘progressive adjustment’: essentially, it merely indicates that this is the procedure by which the elimination of all discrimination is to be achieved by the end of the transitional period. It is therefore clear, as appears from the actual wording of the provision, that the obligation progressively to adjust State monopolies of a commercial character is instrumental with respect to the obligation to eliminate all discrimination as between nationals of the Member States by the end of the transitional period. Moreover, as the Commission itself observed in the course of the proceedings, the progressive nature of the adjustment was provided for for the benefit of the Member States in so far as it enables serious disruption of the economic and social fabric of the States concerned to be avoided and such disruption would be liable to occur if there were a requirement to repeal immediately and ipso jure the domestic provisions to which Article 208(1) refers.

That approach is borne out by the case-law on Article 37(1) of the Treaty and, in particular, by the Court's statement to the effect that the fact that the Treaty gave the Member States a certain time in order gradually to adjust State monopolies is justified by the need for ‘the creation of new circumstances which are compatible with the rule’ that all discrimination must be eliminated by the end of the transitional period. (*2)

Furthermore, as the Court stated in the judgment in the Albatros v Sopéco case, (*3)‘the timetable for the adjustment provided for does not permit of a forecast in the abstract of the dates during the transitional period by which the obstacles in question must have disappeared’. I would further observe with regard to the timetable and manner of the adjustment that the fact that the Commission has been given, under the third subparagraph of Article 208(1) of the Act of Accession, merely the role of prompting and encouraging through the adoption of recommendations — that is to say, instruments of a non-binding nature — indicates that the form and content of the adjustment are left to the Member States' discretion.

4.Yet that does not mean that a Member State can reach the expiry of the transitional period without having even begun the process of adjusting its State monopolies. The gradual nature of the adjustment means that a Member State may not put it off until the end of the transitional period or delay it arbitrarily. As a result, its discretion is limited in certain respects: the Member State must in any event show that it has adopted measures so as to achieve the objective of eliminating all discrimination by the end of the transitional period.

5.4. In the light of the foregoing, it is abundantly clear that, rather than having to examine in detail the process of adjustment which has been commenced by the defendant (and its relative state of advancement) in order to ascertain whether the Commission's charges are well-founded, or in other words to establish whether the Portuguese Republic has failed to fulfil its obligations, it is sufficient to establish: (a) whether, at the date fixed by the reasoned opinion, the Portuguese Government had adopted measures designed to eliminate by the end of the transitional period all discrimination between nationals of the Member States and (b) whether the creation of quotas, as described in the Commission's recommendation, is indispensable with a view to achieving that result.

The Commission argues that the defendant has not yet initiated the adjustment of the monopolies at issue: the measures adopted to date are only preparatory steps with a view to a future adjustment. To my mind, such a claim suggests that the Commission is not denying that the Portuguese Government has already embarked upon the process of adjusting the monopolies, in the sense that, at the date laid down for complying with the reasoned opinion, it was already taking steps to restructure its State monopolies.

Indeed, as regards the monopolies in ethyl alcohol of agricultural and non-agricultural origin, the Portuguese Government has, with the help of Community subsidies, already started to convert fig production and has set in motion a progressive reduction in the price of figs for distillation. In addition, it has reduced the staff of the body responsible for administering the monopoly in question (the AGA) and has started to dismantle its storage capacity. The fact that such measures have been taken is not questioned by the Commission in any way.

As regards, on the other hand, the monopoly in wine spirits for use in the making of port wine, the Portuguese Government maintains that, following the adoption of the Decree-Law of 30 May 1988, the Instituto do Vinho do Porto (IVP) no longer has exclusive rights to purchase wine spirits from and distribute them to wine producers, but confines itself to defending the purity and national and international prestige of port wine. Furthermore, the importation of wine spirits is now conducted by means of public tenders in which any traders in the Community may participate. Admittedly, the Commission denies that those measures are sufficient to preclude discrimination. However, as far as that is concerned, it is sufficient to observe that such charges cannot be substantiated until the end of the transitional period, that is to say, at the date by which the Member State in question is under a duty to have fulfilled its obligation to eliminate all discrimination.

6.In the final analysis, the Portuguese Republic certainly cannot be accused of having deferred the implementation of the progressive adjustment until the end of the transitional period, since there is no doubt that as from the beginning of the transitional period it has adopted a number of measures designed to ‘create new circumstances’. What is more, the Commission has not in fact shown that the measures taken by the Portuguese Government are inappropriate to achieve the objective of the elimination of all discrimination by the end of the transitional period.

7.5. Having said that, I would observe that, above and beyond the individual charges made concerning the measures that the defendant has or has not adopted, one has the definite impression that the Commission is accusing it essentially of not having taken any action on its recommendation by which the Commission asked it to create global quotas for imports and to increase them annually by the percentages laid down in the recommendation.

The alleged infringement is therefore determined precisely by the Portuguese Republic's failure to create the quotas in question. In fact, while acknowledging that a recommendation is not binding on the Member State to which it is addressed, the Commission seems to be taking the view that the only way of implementing the progressive adjustment, and hence of eliminating all discrimination by the end of the transitional period, is to create quotas on the basis of the timetable and methods which it describes in the recommendation. In other words, the only way of fulfilling the obligation laid down in Article 208(1) is the one described in the recommendation.

Is the creation of quotas really an essential precondition for satisfying the obligation in question? Frankly, this does not seem to me to be so and the Commission has not made a case for this in any way. In fact, the impression gained is that the Commission identifies the gradual nature of the adjustment with gradual liberalization. As has already been stated, however, what is important is that the monopoly should be restructured in such a way that the final outcome is the abolition of all discrimination by the end of the transitional period. However, the Commission has not shown that the only means of achieving the outcome sought is the progressive introduction of quotas and there is no evidence that progressive adjustment necessitates the creation of import quotas. On the contrary, an argument to the opposite effect can be inferred from Article 208(2), which expressly provides for the creation of import quotas, but only for certain monopoly products (motor spirit, kerosene, gas oils and fuel oils).

8.In the final analysis, in view of the discretion enjoyed by the Member States within the time-limits laid down and in view of fact that it is sufficient for them to adopt measures demonstrating that they are progressing towards the specified objective (elimination of all discrimination), I consider that the Portuguese Republic has not failed to fulfil the obligation laid down by Article 208(1) of the Treaty of Accession.

*1) Original language: Italian.

*1) OJ 1987 L 306, p. 32.

*2) Judgment in Case 45/75 REWE v Hauptzollamt Landau [1976] ECR 181, paragraph 24.

*3) Judgment in Case 20/64 Albatros v Sopéco [1965] ECR 29.