STIX-HACKL delivered on 10 September 2003 (1)

The Queen on the application of British Sugar plc v Intervention Board for Agricultural Produce (Reference for a preliminary ruling from the High Court of Justice of England and Wales, Queen's Bench Division (Administrative Court))

((Common organisation of the markets in the sugar sector – Export licence for C sugar – Proof of export – Correction of licence – Principle of proportionality – Penalty))

I ─ Introduction

These proceedings concern the interpretation of Commission Regulation (EEC) No 2670/81 of 14 September 1981 laying down detailed implementing rules in respect of sugar production in excess of the quota (2) (Regulation No 2670/81) and the interpretation and validity of Commission Regulation (EEC) No 3719/88 of 16 November 1988 laying down common detailed rules for the application of the system of import and export licences and advance fixing certificates for agricultural products (3) (Regulation No 3719/88).

The case concerns licences for the export of sugar. Specifically, it concerns the consequences of a licence extract applied for by mistake for a small quantity, on the basis of which the intended (1 000 times greater) quantity was in fact exported. It further concerns the consequences of the use of another extract on the basis of which sugar was exported after the validity of the head licence had expired.

II ─ Legal context

A ─ Community law

Organisation of the market in sugar

The production, import and export of sugar is regulated through the common agricultural policy under Articles 32 EC to 38 EC (formerly Articles 38 to 47 of the EC Treaty). At the material time for the present proceedings, the basic rules for this common organisation of the markets were contained in Council Regulation (EEC) No 1785/81 of 30 June 1981 on the common organisation of the markets in the sugar sector (the basic regulation).

The Court of Justice said in the British Sugar (5) case that: In connection with the common organisation of the markets in the sugar sector, (6) the basic regulation seeks to maintain the necessary guarantees in respect of employment and standards of living for producers of basic products and for manufacturers of sugar in the Community and to ensure the continuous supply of sugar to all consumers at reasonable prices, by stabilising the sugar market. In order to control sugar production within the Community, the basic regulation introduced a system of production quotas which, according to the 15th recital in the preamble to that regulation, constitutes a means of guaranteeing producers Community prices and an outlet for their production.

For that purpose the basic regulation defines certain A and B quotas and their amounts. Each Member State is allocated certain quotas per marketing year (1 July to 30 June of the following year). The Member States subdivide these A and B quotas among the sugar producers established in their territory. The undertaking can dispose of the quantities allocated on the internal market or sell them on the world market, with export refunds being available in some cases. The quantity produced within the marketing year by a sugar producer in excess of the A and B quotas is known as C sugar. The present proceedings concern C sugar. C sugar may not be disposed of on the internal market. The sugar producer must export the C sugar it produces to the world market within a prescribed period, (7) without any price supports or export refunds.

Provisions relevant to the export of C sugar

Regulation No 2670/81 (8) is relevant generally. Article 1(1) of Regulation No 2670/81 reads, in extract: The products referred to in Article 26(1) of Regulation (EEC) No 1785/81 shall be considered to have been exported if:

(a) without prejudice to the other provisions of this Regulation, the proof referred to in Article 2 is in the possession of the competent agency of the Member State of production whichever the Member State of export of the C sugar ... may have been; ... Except in cases of force majeure, if any of the conditions provided for in the first subparagraph are not fulfilled, the quantity of C sugar ... concerned shall be considered to have been disposed of on the internal market. ...

Article 2(2) of Regulation No 2670/81 reads, in extract: 2. Such proof shall be furnished by the production of:

(a) an export licence issued pursuant to Article 3 of Regulation (EEC) No 2630/81 (9) to the manufacturer by the competent agency of the Member State referred to in paragraph 1; ...

Article 3(1) of Regulation No 2670/81 reads, in extract: 1. The Member State concerned shall levy on quantities which, within the meaning of Article 1(1), have been disposed of on the internal market, a charge for C sugar per 100 kilograms of white or raw sugar as appropriate ..., equal to the sum of:

─ the highest import charges applicable to the product concerned during the period comprising the marketing year during which the C sugar ... was produced and the six months following that marketing year and

─ ECU 1.21.

Since the effectiveness of the entire system of the Community organisation of the agricultural markets depends on a comprehensive knowledge of trade with non-member countries, (10) the basic regulation prescribes that licences are required for imports and exports of agricultural products.

The general provisions on import and export licences and their administrative treatment by the national authorities were regulated at the material time in Regulation No 3719/88. Article 24 of Regulation No 3719/88 reads: 1. Entries made on licences, certificates or extracts may not be altered after their issue.

Commission Regulation (EC) No 1464/95 of 27 June 1995 on special detailed rules for the application of the system of import and export licences in the sugar sector (12) (Regulation No 1464/95) contains special provisions on export licences for C sugar.

The provisions which are material for the present proceedings may be summarised as follows.

An export licence authorises and obliges the holder to export from the internal market the quantity of the relevant product specified in the licence within its period of validity. (13) The licence is granted on application, using a form prescribed by the regulation, by the authorities competent nationally for the issue of licences (the licensing authority). (14)

On the basis of an export licence (the head licence), extracts may also be issued. An extract has the same legal effect as the head licence for the quantity in respect of which it is issued. (15) An extract is issued on the same forms as the head licence. Copy No 1 of the head licence or extract (the holder's copy, Copy No 1) is issued to the applicant. Copy No 1 is submitted to the customs office of export (the Customs) when the export declaration is made, and attributed and endorsed there. The applicant then receives Copy No 1 back and sends it to the licensing authority. If extracts are issued, the quantity specified in each extract is attributed to the head licence, stating the number of the extract, until the total quantity stated in the head licence is exhausted. (16)

The total quantity in the head licence must in any case ─ including where extracts are used ─ be exported within the period of validity of the head licence. The period of validity of a licence for the export of C sugar is regulated in Regulation No 1464/95. It is valid from the day of issue until the end of the third month following that of issue. (17)

The obligation to export is considered to have been fulfilled on the day when the export declaration for the corresponding quantity of C sugar was accepted by the Customs. Proof that the export requirement has been fulfilled (in due time) is furnished by Copy No 1 of the relevant licence, attributed and endorsed, and by additional proof. (18) Detailed rules as to additional proof are left to the choice of the Member States, if ─ as in the present case ─ the export declaration is made within the Member State whose authorities issued the licences. (19)

B ─ National law

According to the national court, the following procedure is laid down in the United Kingdom for export licences for C sugar.

The competent authority for the issue of export licences for C sugar is the Intervention Board for Agricultural Produce (IBAP), the respondent in the main proceedings.

Applications for head licences or extracts may be made in writing or by telephone. If a head licence and one or more extracts are applied for at the same time, the applicant is notified of the issue of the head licence. According to the High Court, he is not given any of the copies of the head licence, so that the whole set of forms of the head licence and Copy No 2 of the extract is retained by the IBAP. (20) The applicant receives only Copy No 1 of the extract. The extracts issued are, however, identical in content with the head licence (except for the indication of the partial quantity in question). In particular, they always state the total quantity for which the head licence was issued. If so desired by the applicant, Copy No 1 of the extract is sent by the IBAP directly to the shipping agent named by the applicant.

The additional proof referred to in point 14 above is furnished in the United Kingdom by means of Form C88(CAP). This form is completed by the licence holder (in accordance with Article 2(2)(a) of Regulation No 2670/81, this is the sugar producer) and sent either directly to the Customs or to the shipping agent. If the shipping agent receives Copy No 1 of the licence directly from the IBAP and Form C88(CAP) from the holder of the licence, he sends both together to the Customs.

On or after export, the Customs endorse and attribute the Form C88(CAP) and send it to the IBAP. The Customs also attribute and endorse Copy No 1 of the licence, but do not return it to the licence holder or shipping agent. If the entire quantity to which the licence relates has been shipped, the licence holder or shipping agent returns Copy No 1 of the licence, stamped by the Customs, to the IBAP within 60 days from export.

III ─ Facts and main proceedings

On 7 August 1997 British Sugar applied for a head licence for the export of 20 000 tonnes of C sugar, which was issued by the IBAP on the following day under number 3SG00070. This head licence was valid up to and including 30 November 1997. At the same time a first extract was applied for and issued. Copy No 1 of the first extract was ─ at British Sugar's request ─ sent by the IBAP directly to the shipping agent named by British Sugar.

British Sugar applied for a total of 60 extracts from the head licence. Copy No 1 of each extract was sent, at British Sugar's request, directly by the IBAP to the shipping agent. At the material time British Sugar had thus seen neither Copy No 1 of the extracts nor Copies No 1 and 2 of the head licence, which were retained by the IBAP.

The present proceedings concern more particularly two of the extracts from head licence 3SG00070, namely the 3rd and 46th extracts.

The third extract

23. The third extract is numbered 3SG00070/3. It was applied for on British Sugar's own standard form, on which the export quantity applied for had been entered under tonnage required in figures as 2 900 with no unit specified and below that in words as two thousand nine hundred kilogrammes. British Sugar explained in the main proceedings that the latter entry was a clerical error, the real intention having been to apply for an extract for two thousand nine hundred tonnes.

24. The IBAP issued the third extract for a quantity of 2.9 tonnes on 11 August 1997 and made a corresponding attribution on the head licence. On the Form C88(CAP), the figure 2 900 was originally typed in box 38 (Net mass (kg)). However, the shipping agent corrected the Form C88(CAP) by writing in 2 900 000 by hand. The shipping agent further described the shipment in box 31 (package and description of goods) as white crystal sugar 58 000 x 50 kg (i.e. 2 900 000 kg). In box 47 (quantity details) the figure 2 900 was entered in the column headed net mass and the column headed unit was left blank. In the column headed export licence extract number 3SG00070/3 was entered, which was issued for a quantity of 2.9 tonnes.

25. On 14 August 1997 the shipping agent presented the Form C88(CAP) and Copy No 1 of the third extract to the Customs, with a covering letter seeking permission to load 3 000 tonnes of C sugar. In that letter the Customs were requested to stamp the latter as proof that permission to load had been given. The letter was stamped by the Customs on that date.

27. The export declaration was received by the Customs on 29 August 1997, and the Form C88(CAP) attributed and endorsed on that date. The Customs moreover put their stamp against the entry with the shipping agent's handwritten correction of 2 900 000. The Customs also stamped the Form C88(CAP) and ticked box A1, marked Satisfied that the goods specified have left the UK ... for export to a non-member country. On Copy No 1 of the third extract, the Customs attributed 2 900 T in figures and Two million nine hundred thousand kilos in words and placed their stamp and signature on it. The IBAP received Copy No 1 of the third extract on 15 September 1997.

28. A further 57 extracts were subsequently applied for and issued under the head licence (until the entire quantity of the head licence was extinguished) on the basis that the third extract had previously been issued and used for 2.9 tonnes of C sugar only.

30. The Customs further stamped with the date 3 December 1997 a Form C88(CAP) which related to a total quantity of 480 000 kg and contained in box 47 (quantity details) inter alia a shipment of 158.2 (no unit stated) with a reference to extract number 3SG00070/46. The Customs also ticked box A1 on that form, marked Satisfied that the goods specified have left the UK ... for export to a non-member country.

31. On 9 December 1997 the IBAP received this Form C88(CAP) relating to the partial quantity of 158.2 tonnes included in the 46th extract.

33. When and for what quantities the extracts following the third extract were applied for, issued and used, is not known in detail. On 9 October 1997 (the date on which British Sugar was informed of the discrepancy as to quantities) there were only 29.525 tonnes of the total quantity left on the head licence, in accordance with the attributions of the extracts issued and used until then. On 16 October 1997 this residual amount was exported under a final (60th) extract applied for and issued for that quantity.

34. On the date of receipt of Copy No 1 of the 46th extract, 9 December 1997, the IBAP checked these export documents too, and found that 158.2 tonnes of C sugar under the 46th extract had not been exported until 3 December, after the expiry of the head licence. British Sugar was informed in writing shortly afterwards of that irregularity.

35. According to the High Court, British Sugar contacted the IBAP on 19 December 1997 to obtain information on the unclear points in connection with the third extract. Afterwards there were further conversations, in the course of which no agreement could be reached in the matter. By letter of 20 April 1998, British Sugar formally called on the IBAP to make use of its power of correction under Article 24 of Regulation No 3719/88 with respect to the third extract mistakenly applied for as 2 900 kg, in order to regularise the position and remove the inaccuracies. The IBAP declined to make such a correction.

36. By letter of 30 April 1998, the IBAP imposed a penalty, calculated in accordance with Article 3(1) of Regulation No 2670/81, for failure to comply with the requirements of Article 2(2) of Regulation No 2670/81. The penalty relates to 3 055.3 tonnes of sugar. That sum derives from the 2 897.1 tonnes which, in the IBAP's view, were not covered by the third extract (in other words, 2 900 tonnes less 2.9 tonnes) plus 158.2 tonnes for the part of the 46th extract which, in the IBAP's view, was no longer covered by the head licence after the expiry of the latter's period of validity. The penalty sought amounts to a total of GBP 1 455 520.49.

IV ─ The questions referred for a preliminary ruling

38. By order of 20 July 2001, the High Court of Justice, Queen's Bench Division, referred the following questions to the Court:

(a) a trader has exported a quantity of C sugar which exceeds the amount for which export was authorised by the licence concerned; and/or

(b) a trader has exported C sugar after the expiry of the validity of the licence authorising the said export; and

(c) even if, as a matter of fact, the relevant C sugar left the Customs territory of the Community; has the proof required by the first indent of Article 2(2) of Regulation 2670/81 been furnished in relation to that export, or that element of the relevant export, which was not covered by a valid licence?

(a) the trader presented to the customs authority a customs declaration form (C88) amended in manuscript to reflect the amount actually exported; and

(b) the customs authority has endorsed the relevant licence extract against the trader's entry in the actual amount exported?

(a) the trader intended to apply for an extract for 2 900 tonnes;

(b) owing to an error on the part of the trader, a licence extract was issued for 2.9 tonnes and this 2.9 tonnes was recorded in the records of both the Intervention Board and the trader;

(c) the licence extract was [amended], with the authority of the trader, by the trader's agent, accurately to record the trader's intention of exporting 2 900 tonnes;

(d) that licence extract was subsequently endorsed by H.M. Customs & Excise to certify the export of 2 900 tonnes of sugar;

(e) the sugar was subject to a Form C88 export licence for 2 900 tonnes, which was subsequently attributed and endorsed by H.M. Customs & Excise;

(f) 2 900 tonnes of sugar were in fact exported;

(g) licence extracts were subsequently applied for, and granted, on the basis that only 2.9 tonnes had earlier been authorised for export;

(h) each subsequent licence extract was duly attributed and endorsed and all sugar tonnages so noted were in fact exported;

(i) in the result, 2 897.1 tonnes of sugar were exported in excess of the volume authorised in the original licence?

4. Does Article 24 of Regulation 3719/88 enable the competent authority to withdraw the extract or the licence or certificate as well as any extracts previously issued and require the competent authority to issue without delay a corrected licence or extract or any attribution thereto in circumstances where:

(a) there is no obvious or manifest error on the face of the licence or extract itself and where there has been no error on the part of the issuing agency; and/or

(b) the amendment is sought to be made after the expiry of the validity of the relevant extract or head licence?

(c) Does it make a difference if the trader intended to apply for a licence extract (from a licence already issued) in respect of a quantity greater than that for which he called off?

5. If the answers to the above questions are negative, do the provisions of Article 24 of Commission Regulation 3719/88 infringe the Community law principles of proportionality and/or equality in that the absence of any power to amend the head licence, licence extract or attributions thereto may, in the circumstances referred to above, lead to the imposition of a fine under Article 3 of Commission Regulation 2670/81?

(b) If so, are there any factors in this case which the Court regards as relevant to the exercise of that discretion?

V ─ Essential submissions of the parties

39. The Commission and the United Kingdom take the view that the proof required under Article 2(2) of Regulation No 2670/81 is to be regarded as not having been furnished in the case of an export which goes beyond the quantity (the 3rd extract) or period of validity (the 46th extract) of a head licence.

40. They rely generally, to begin with, on the Court's judgment in Südzucker Mannheim and on Article 8(1) of Regulation No 3719/88. Those two elements show the particular importance of the control system in a market which is completely regulated by the quota system of the sugar COM. The statements of quantities in the licences and the period of export determined by the validity of the licences are of central importance for the working of the entire system.

41. With reference specifically to the third extract, they emphasise that the result was that 2 897.1 tonnes of C sugar were in any case exported without a licence: either simply on the basis of the discrepancy between the partial quantity authorised and that actually exported, or at the latest when British Sugar exceeded the quantity under the head licence because all further extracts had been issued and used on the basis of a third extract authorised for 2.9 tonnes only.

42. Nor could the mistake be corrected by a representative of the sugar producer (in this case the shipping agent) altering the quantity stated so as to show the quantity actually to be exported. The Court of Justice already said in Südzucker Mannheim that other proof of the actual quantity exported does not release the holder of a licence from the obligation to comply fully with the formal requirements for sugar exports.

43. Nor does the conduct of the Customs make any difference to the incorrectness of the export. The endorsement and attribution by the Customs of the quantity actually exported on the basis of the amended Form C88(CAP) related only to the quantity exported, not to its corresponding to the extract. The Customs are responsible only for export control as such. Administration and control of the sugar COM is the sole responsibility of the licensing authority.

44. On the interpretation of Article 24(2) of Regulation No 3719/88, the Commission and the United Kingdom submit that that provision must be understood in connection with the 17th recital in the preamble and, being an exception, must be interpreted strictly. The application of the provision is thus limited to cases of inaccuracies which are clear on the face of a licence and mistakes on the part of the licensing authority. If the licensing authority authorises the export quantity applied for by the sugar producer, there is thus no obvious inaccuracy. In any case, the sugar producer's intention when making the application cannot be decisive, since that is a subjective element whose taking into account would be incompatible with effective management of the regulated sugar market.

45. Moreover, a correction in accordance with Article 24(2) of Regulation No 3719/88 may in principle no longer be made after the expiry of the period of validity of the head licence. The 17th recital in the preamble makes clear that that provision is intended to promote sound administration. Effective management of the sugar COM requires, however, that the licensing authorities have accurate and timely information on the current state of sugar exports, which would no longer be ensured if licences were altered retroactively.

46. With respect to the compatibility of Article 24(2) of Regulation No 3719/88 with the principles of proportionality and equal treatment, the Commission and the United Kingdom again rely on the judgment in <i>Südzucker Mannheim</i>, (24) in which it was held generally that the obligation to comply with the licensing formalities, in view of their special importance for the functioning of the sugar COM, does not infringe the principle of proportionality. It follows, moreover, from the Court's consistent case-law (25) on the principle of proportionality that it is to be measured against the purpose of the rule concerned. Licences play a central part in the management of the sugar COM and their content may thus be amended only under the strict conditions laid down in Article 24 of Regulation No 3719/88. The licence-holder is not burdened disproportionately if that article is not applied, since in the case of a statement of quantity on an extract which is based on an incorrect application by the sugar producer, he (or his representative) is aware of the mistake at the latest when the extract is returned, and he can immediately apply for further extracts up to the amount actually intended to be exported.

47. On the compatibility of Article 24 of Regulation No 3719/88 with the principle of equal treatment, they submit that a licence can indeed be corrected if the mistake is obvious or is a mistake on the part of the licensing authority, but not if it merely corresponds to an incorrect application by the sugar producer. The provision therefore treats the same things in the same way and different things differently, so that there is no breach of the principle of proportionality.

48. On the interpretation of Article 3(1) of Regulation No 2670/81 as regards the amount of the penalty, they submit that the method of calculating penalties precisely defined in that provision in principle leaves no room for divergent decisions of the licensing authorities and/or the national courts. The legal consequence is of crucial importance for ensuring the proper functioning of the sugar COM. A flexible calculation of penalties would lead to undertakings being treated differently in different Member States in an unjustifiable manner.

49. <i>British Sugar</i> submits that proof in accordance with Article 2(2) of Regulation No 2670/81 is also to be regarded as having been provided if the quantity stated in a licence (the 3rd extract) or its period of validity (the 46th extract) is exceeded.

50. British Sugar argues, in support of its view, that licences produce legal effects generally which go beyond the statement of the authorised quantity and export period, and one cannot therefore speak of an export without a licence. The purpose of Article 2(2) of Regulation No 2670/81 is proof of the actual export. This is proved by the proper attribution and endorsement on the extract by the Customs, who act in this respect as the representatives of the IBAP. The general purpose of licences is the obtaining of accurate information on Community trade in agricultural products.

51. On Article 24(2) of Regulation No 3719/88, British Sugar submits that that provision, as follows from the 17th recital in the preamble and from the general purpose of agricultural licences (the obtaining of accurate information on Community trade in agricultural products), applies not only in the case of mistakes of the licensing authority but generally to obvious inaccuracies in a licence. That cannot depend on a mistake being visible on the face of the document. On 15 September 1997 at the latest, the IBAP was able to spot the discrepancy in the quantities stated on the basis of the documents transmitted to it and able, by amending the third extract to correspond with the actual export, to avoid further extracts being issued and the total quantity under the head licence eventually being exceeded.

52. Article 24(2) of Regulation No 3719/88 is also applicable after the expiry of the head licence. The provision does not contain any such limitation of its applicability, nor is any other interpretation consistent with the general purpose of licences, as explained.

53. On the compatibility of Article 24 of Regulation No 3719/88 with the principles of proportionality and equal treatment, British Sugar relies on the general case-law of the Court. (26) That case-law shows that the imposition of a penalty of GBP 1 500 000 for a simple clerical error in connection with the application is not compatible with those principles.

54. On the interpretation of Article 3(1) of Regulation No 2670/81 with respect to the amount of the penalty, British Sugar relies on paragraphs 78 et seq. and 88 et seq. of the Opinion of Advocate General Mischo in the <i>British Sugar</i> case, (27) from which it may be deduced that the provision would infringe the principle of proportionality if it were applicable unrestrictedly even to cases of minor negligence or where the licensing authority is partly responsible.

VI ─ Answer to the questions referred for a preliminary ruling

A ─ The first to third and seventh questions

55. Common to these questions is the request for an answer to the question of when proof is to be regarded as having been furnished within the meaning of point (a) of the first subparagraph of Article 2(2) of Regulation No 2670/81 (due furnishing of proof).

56. Question 1(a) and (c) and Question (2), and Question (3) as regards content, concern the due furnishing of proof where the quantity actually exported is not the same as the quantity stated in a licence. In that connection, Questions 2 and 3(d) to (f) raise the question of what significance the endorsement by the Customs that the export actually took place and the endorsement of what quantity was actually exported may have for the question of due furnishing of proof. Question 3 raises the question, in parts (a) to (c), of what significance it may have that the sugar producer mistakenly applied for the extract for a smaller quantity than that intended for export, the extract was issued in accordance with the application, and the extract was then amended by unauthorisedly correcting the amount upwards to the quantity originally intended. Parts (g) to (i) of the question concern the particular aspect that subsequent extracts were applied for and granted in accordance with calculations based on the extract which had been applied for with the amount mistakenly understated, with the result that the total amount authorised in the head licence was eventually exceeded.

57. Question 1(b) and (c) concerns the due furnishing of proof where there is a discrepancy between the export period defined in a licence and the actual export. Question 7 in my opinion relates to the same point of law, because, firstly, it refers to the paragraphs of the order for reference which address the same facts and, secondly, both the national court and the parties discuss this question solely in relation to the conditions for imposing the corresponding part of the penalty.

58. In Questions 1(a) to (c) and 7, the High Court asks whether proof is duly furnished if only the quantity of sugar actually exported or the actual date of export are proved, but not the fact that they correspond to the quantity for export or period of export stated in the licence. (28)

59. In my view, the obligation to furnish proof is fulfilled only when export in conformity with the licence is proved. That is supported by the following considerations.

60. The Court has already in the <i>Südzucker Mannheim</i> case, (29) in which an export of C sugar clearly took place without a licence (extract), addressed the part played by export licences for C sugar in the sugar COM and stressed the particular importance of licences for the functioning of the entire quota system.

61. Export licences for C sugar do not only, however, serve to prove the quantity exported and the date of export, and other facts connected with the export, as was stated in that judgment. (30) Export licences for C sugar, in my opinion, also serve the temporal and quantitative regulation of such exports, which is necessary to prevent undesirable consequences for the sugar COM (31) and to be able to control the quantities of sugar from the common market offered on the world market.

62. It also follows from the preamble to the basic regulation that export licences for agricultural products serve not only for the observation but also for the management of trade with non-member countries. The eighth and ninth recitals in the preamble to the basic regulation state that appropriate provisions should be laid down in order to avoid in good time a situation where regional surpluses are exported to third countries and that to this end, provision should be made for a system of import and export licences ... [which] guarantee that the operation for which the licence is being requested will be carried out. (32)

63. That is also the reason why export licences for C sugar are granted only for a limited quantity and not, for instance, generally for the (in principle unlimited) quantities of C sugar which a producer can produce. The same applies to the limited period of validity of licences, as a result of which exports have to take place within a period which differs from the general export period, related to the marketing year, for the total amount of C sugar produced by a producer. (33)

64. If, then, export licences are also used for imposing quotas on the export of C sugar in the individual case, proof of compliance with the quantities and periods specified in the licences must be regarded as mandatory. An export which takes place with proof being provided only of the quantity actually exported and the actual date of export, but with the quantity stated in the licence or the period for export being exceeded, must therefore be regarded as an export without proof within the meaning of Article 2(1) of Regulation No 2670/81, and the conditions are met for the imposition of a penalty pursuant to Article 3 of the regulation.

65. The answer to Questions 1(a) to (c) and 7 must therefore be that proof in accordance with Article 2(2)(a) of Regulation No 2670/81 is not furnished if the quantity of C sugar actually exported exceeds the total quantity stated in the licence or the export takes place after the expiry of the period of validity of the licence. A penalty under Article 3 of the regulation based on the latter infringement is therefore correctly imposed.

66. Questions 2 and 3(d) to (f) are aimed at the question whether exceeding the licence quantity does not preclude proof being duly furnished if the Customs have attributed and endorsed the actual quantity exported on the corresponding extract and/or the additional proof. I consider that that is not the case.

68. The function of the Customs in the context of the sugar COM therefore consists in aiding the licensing authority, but the Customs do not ─ as British Sugar believes ─ act as the authority's legal agent for all its functions. Attribution and endorsement of the amount actually exported cannot therefore have any significance in law as regards the due furnishing of proof.

69. The answer to Questions 2 and 3(d) to (f) must therefore be that proof in accordance with Article 2(2)(a) of Regulation No 2670/81 is not furnished, where the total quantity stated in a licence is exceeded, even if the Customs have attributed and endorsed the actual quantity exported on the corresponding extract and/or the additional proof.

72. I would like to deal first with the general question of the significance of a mistake of the sugar producer in stating the quantity in an application for an extract (Question 3(a) and (b)) and show that such a mistake, simply on grounds of principle, cannot preclude there being an infringement of the duty to furnish proof because of exceeding the export quantity authorised. (34)

73. A mistake made by the sugar producer when applying for an extract ought to be evident to the sugar producer or his representative (for instance, the shipping agent) at the latest when the quantity of sugar intended for export is presented to the Customs with the extract being produced. The knowledge and conduct of his agent must be imputed fully to the sugar producer in that respect. (35) A sugar producer who makes a mistake of that sort could therefore fulfil his obligation to furnish proof simply by applying, before exporting the amount actually intended, for a further extract to cover the missing quantity.

74. If that is not done, then there would in any case be a failure to fulfil the obligation to furnish proof at the latest (36)

when the sugar producer who has made the mistake as to quantity when applying for an extract exports C sugar on the basis of further extracts which have been arithmetically correctly determined and issued by the licensing authority on the basis of the extract incorrectly applied for in respect of too small a quantity, if the use of these further extracts leads to the total export quantity authorised in the head licence being exceeded.

75.According to the facts stated by the national court, which recur in parts (g) to (i) of Question 3, this was the case in the dispute in the main proceedings; the total quantity was eventually exceeded, by the difference between the quantity applied for and authorised in the third extract and the quantity actually exported under that extract.

76.In my view, in such a case a failure to comply with the duty to furnish proof lies in the use of the extract which exceeds the total export quantity. That follows from the fact that the sugar producer ─ unlike the licensing authority ─ is able immediately before the corresponding partial exports to recognise a threatened exceeding of the total quantity as a result of using the corresponding extracts. That is because the total quantity under the head licence is restated in each extract and must therefore be known to the sugar producer. The sugar producer must also in principle know what quantities of C sugar he has already actually exported since the issue of the head licence. The licensing authority, on the other hand, approves the quantities in the extracts purely on the basis of the extracts previously issued, arithmetically correctly from its point of view. Only at a later point in time, namely after receipt of the proofs attributed and endorsed by Customs (Copy No 1 of the extract and special proof), is it able to ascertain the quantity actually exported.

77.It must therefore be taken that it must be visible to the sugar producer, either already when applying for or at the latest before using one of the subsequent extracts, whether or not he will by using it exceed the total quantity approved in the head licence. The same applies of course where the sugar producer makes use of a representative (for example, the shipping agent).

78.The sugar producer cannot therefore, for the export of the partial quantities with which he eventually exceeds the total quantity in the head licence, rely on the appearance of legality of the subsequently issued extracts in order to show that the exports were effected with proof being duly furnished.

79.It could be different only if in the particular case the licensing authority too must have been aware, before issuing further extracts, of the risk that the total quantity licensed would be exceeded, and nevertheless issued further extracts. It seems to me, however, that in the present case there is no reason to suppose that that was the case. It cannot be stated precisely when the application was made for the first of the subsequent extracts, use of which threatened to exceed the total quantity authorised. But it is not disputed that the IBAP could see the difference between the quantity of C sugar authorised in the third extract and the quantity actually exported under that extract only after they received the documents endorsed and attributed by the Customs (additional proof and Copy No 1 of the third extract).

80.Now it might be the case that the total quantity of the head licence was in fact not yet completely exhausted on that date, so that exceeding the total quantity in the head licence could have been prevented by refusing to grant the relevant extracts. However, the IBAP had in the meantime already called on British Sugar to provide proof that the third partial quantity had been exported in compliance with the extract, and until clarification of the entire situation had merely continued to issue further extracts applied for by the sugar producer. That was in the interest of the sugar producer, who was after all not only entitled but also obliged to export the total quantity within the period of validity of the head licence. In such a case, therefore, it can in principle surely not be assumed that a licensing authority must or could in the particular case have known of the exceeding of the total quantity in the head licence when the subsequent extracts were applied for, so that further extracts should not have been granted.

81.The answer to Question 3(a) to (c) and (g) to (i) must therefore be that there is also a failure to comply with the duty to furnish proof in accordance with Article 2(2)(a) of Regulation No 2670/81 if C sugar in excess of the total quantity authorised in the head licence is exported on the basis of extracts which the licensing authority has issued, arithmetically correctly, on the basis of the extract mistakenly applied for in respect of too small a quantity, and the issuing of extracts after the total quantity has been exhausted cannot be imputed to the licensing authority as a contributory cause.

The fourth and fifth questions

82.By Question 4(a) to (c) and Question 5, the national court asks as to the interpretation, and if necessary the validity, of Article 24(2) of Regulation No 3719/88.

Interpretation of Article 24(2) of Regulation No 3719/88

83.It is for the Court of Justice, in the context of the functions conferred on it by Article 177 of the EC Treaty, to determine, on the basis of the matters of law and fact set out in the order for reference, the actual subject-matter of the main proceedings, in order to provide the national court with the relevant aspects of interpretation of Community law for it to decide the specific case pending before it. The answer to Question 4(a) to (c) must therefore be limited to the interpretation of Article 24(2) of Regulation No 3719/88 in circumstances such as those of the main proceedings.

The question of the inaccuracy of entries in an extract mistakenly applied for in respect of too small a quantity and granted accordingly

84.It must first be clarified whether in such a case the accuracy of entries on the licence, certificate or extract is in doubt at all (first sentence of Article 24(2) of Regulation No 3719/88). That is clearly what Question 4(a) is aimed at.

85.I do not take the view that there were inaccurate entries in the extract in this case. The licensing authority issued the extract in question for the partial quantity stated in the application. The entries in the extract itself are thus not inaccurate in any way. At most the entries in the application may be inaccurate. But the amending of licence applications is not the subject-matter of the said provision.

86.If, then, according to the submissions of the parties and the statements of the national court, there were no inaccurate entries in the extract, it is also immaterial whether the inaccuracy was obvious or not (17th recital in the preamble).

87.As in my view there is thus no error within the meaning of Question 4(a), the examination of Question 4 could really be ended at this point.

Applicability of Article 24(2) of Regulation No 3719/88 in the particular circumstances such as those of the main proceedings

88.In my opinion, even on the assumption that the subjective inaccuracy of the quantity stated in the application is, because of the content being the same, reflected as an objective inaccuracy in the extract issued, there are considerations of principle which argue against the conclusion that Article 24(2) of Regulation No 3719/88 is to be applied in cases such as that in the main proceedings. That follows from the following considerations.

89.Any amendment to a licence is an interference with the principle of the appearance of legality for export licences laid down in Article 24(1) of Regulation No 3719/88. A correction under Article 24(2) must therefore, as an exception to that principle, be made subject to very strict conditions, that is, the provision must be interpreted narrowly as regards its scope.

90.The objective pursued by the sugar producer in the case of an extract erroneously applied for in respect of too small a quantity (export in compliance with the duty to furnish proof under Article 2(2) of Regulation No 2670/81) can ─ as already stated above ─ also be achieved by applying for and being granted in due time a supplementary extract. If such an alternative possibility exists, the application of the rules on correction, as an exception, is in my view excluded.

91.The possibility of a supplementary extract exists only, of course, as long as the total quantity authorised in the head licence has not yet been exhausted at the time in question. Otherwise, the grant of a supplementary extract after that date would lead to the total quantity authorised in the head licence being retrospectively increased. That would be incompatible with the central function of export licences in the regulation of sugar supply in the sugar COM.

92.So if the sugar producer, despite the perceptibility of the discrepancy between the export quantity intended and that authorised, has for reasons within his responsibility (for instance, lack of attention of his representative or absence of information from the sugar producer) omitted to apply for a supplementary extract in due time before the actual exhaustion of the total quantity, this error cannot, in my opinion, be cured by means of the application of Article 24(2) of Regulation No 3719/88, since that would lead to the same undesirable consequences as actual export exceeding the total quantity authorised. Both are incompatible with the regulatory function of export licences for C sugar.

93.Article 24 of Regulation No 3719/88 must therefore be interpreted as meaning that the licensing authority is neither empowered nor obliged to correct upwards the quantity stated in a licence, if the quantity of C sugar originally authorised by the licence has already actually been exported.

94.Since, then, the correction of extracts or the head licence using Article 24 of Regulation No 3719/88 is excluded in cases such as that in the main proceedings for reasons of principle, the question of the permissibility of corrections after the expiry of the period of validity of the head licence (Question 4(b)) need not be considered further.

Conclusion

95.For the purpose of answering Question 4, it must therefore be concluded that the applicability of Article 24(2) of Regulation No 3719/88 is excluded if a licence is to be corrected because the quantity stated in an extract is based on an error in the sugar producer's application and the correction is to take place after actual exhaustion of the total quantity authorised in the head licence.

Validity of Article 24 of Regulation No 3719/88

96.Since the applicability of Article 24(2) of Regulation No 3719/88 has been rejected for the reasons set out above and Question 4 as a whole has therefore been answered in the negative, Question 5 must be answered. This question relates to the compatibility of Article 24 of Regulation No 3719/88, interpreted as in the answer to Question 4 proposed above, with the principles of proportionality and/or equal treatment.

97.On this point, it need only be remarked that in the present proceedings scarcely any indications were given as to why the non-applicability of Article 24 of Regulation No 3719/88 in the cases described in Question 4 should breach those principles.

98.In so far as British Sugar relies on the case-law on the general principle of proportionality, it must be observed that the absence of power to correct a licence under Article 24(2) of Regulation No 3719/88 (that is, the non-applicability of an exception) is not a penalty. According to that case-law, a penalty may indeed infringe the principle of proportionality if it appears excessive in comparison with penalties for more serious breaches. But such a question cannot even arise in that way in the case of the non-applicability of a provision which constitutes a derogation from the principle of legal certainty.

99.In so far, then, as the national court's question relates to the validity of the actual penal provision, namely the provision on penalties in Article 3(1) of Regulation No 2670/81, it suffices to refer to the Court's judgment in Südzucker Mannheim. The Court held that compliance with the formalities provided for on the export of C sugar (this was a reference to export under production of an attributed and endorsed export licence) was to be regarded as forming part of the primary obligations ... in so far as those formalities are not only intended to simplify administrative procedures but are also necessary to the proper functioning of the quota system in the sugar sector. They are not therefore to be classed as secondary obligations of an essentially administrative nature, failure to comply with which cannot be penalised as severely as infringement of a primary obligation without breaching the principle of proportionality.

100.The answer to Question 5 must therefore be that consideration of the question has not revealed any factor which could affect the validity of Article 24 of Regulation No 3719/88.

The sixth question

101.Question 6 is aimed at ascertaining whether the licensing authority or a national court enjoys a discretion when calculating the amount of the penalty under Article 3(1) of Regulation No 2670/81, and if so, what criteria should be observed.

102.There is nothing in the wording of Article 3(1) of Regulation No 2670/81 to indicate that the calculation laid down in that provision could be departed from in the discretion of the licensing authorities.

103.In his Opinion in British Sugar, Advocate General Mischo nevertheless did not exclude such a departure in principle, if the licensing authority's own conduct was at least partly responsible for the conduct of a producer of C sugar which was relevant for the penalty. In the judgment, however, the Court saw no occasion to consider the point.

104.In the present proceedings, the sugar producer's conduct relevant for the penalty consisted in an export of C sugar without proof within the meaning of Article 2(2)(a) of Regulation No 2670/81, since the head licence was exceeded temporally and as regards quantity. No grounds have been adduced which could show any conduct on the part of the IBAP which was partly responsible for that misconduct.

105.The answer to Question 6 must therefore be that in principle it is not within the discretion of the licensing authority or a national court to vary the amount of the penalty under Article 3(1) of Regulation No 2670/81.

Accordingly, I propose that the Court should answer the High Court's questions as follows: