Important legal notice

61988C0012

European Court reports 1989 Page 02937

Opinion of the Advocate-General

My Lords,

1 . In this case the Court is asked to rule on the interpretation of Paragraph 3 of the Protocol on German internal trade and connected problems in relation to restrictions imposed by the Netherlands Government in pursuance of a common policy adopted by the Benelux countries on imports from the Federal Republic of Germany (" the Federal Republic ") of goods originating in the German Democratic Republic (" the GDR ").

The legal background

3 . The preamble to the Protocol refers to "the conditions at present existing by reason of the division of Germany ". Paragraph 1 of the Protocol provides that :

"Since trade between the German territories subject to the Basic Law of the Federal Republic of Germany and the German territories in which the Basic Law does not apply is a part of German internal trade, the application of this Treaty in Germany requires no change in the treatment currently accorded this trade ."

4 . Under Paragraph 2 of the Protocol, each Member State is to inform the other Member States and the Commission of any agreements relating to trade with the German territories in which the Basic Law of the Federal Republic of Germany does not apply ( i.e . the GDR ) and of any implementing provisions . In addition, each Member State is to ensure "that the implementation of such agreements does not conflict with the principles of the common market" and in this regard "shall in particular take appropriate measures to avoid harming the economies of the other Member States ". In view of the development of the Community' s common commercial policy, as mentioned below ( paragraph 7 ), the obligations arising under Paragraph 2 are now only of relevance for the Federal Republic since it is now the only Member State which, by virtue precisely of the system of inter-German trade preserved by the Protocol, maintains autonomous bilateral trade relations with the GDR .

5 . Paragraph 3 provides that :

"Each Member State may take appropriate measures to prevent any difficulties arising for it from trade between another Member State and the German territories in which the Basic Law of the Federal Republic of Germany does not apply ."

6 . The system of inter-German trade preserved by the Protocol goes back to the Berlin Agreement of 20 September 1951 made between the German currency zones ( current version published in the Bundesanzeiger No 91, 18.5.1985, p . 5017 ) and to various laws and regulations adopted in 1949 and 1950 by the military occupation authorities . The detailed operation of the system is regulated by implementing legislation adopted autonomously by the Federal Republic . Under the system as currently operated, goods originating in the GDR and directly entering the Federal Republic are not subject to customs duties under the Common Customs Tariff, to agricultural levies or to import quotas adopted under the Community' s common commercial policy . In addition, importers of goods from the GDR are permitted to deduct from their liability to VAT 11 % of the invoiced cost of the goods, representing the notional amount of VAT which is deemed to have been paid in the GDR .

7 . Direct trade relations between the GDR and Member States other than the Federal Republic are no longer affected by the Protocol and are governed by the Community' s common commercial policy . Thus direct imports from the GDR into Member States other than the Federal Republic are subject to customs duties under the Common Customs Tariff, to agricultural levies and to the Community' s common arrangements for imports into the Community of products from State-trading countries . These common arrangements are laid down in Council Regulation No 1765/82 ( Official Journal 1982, L 195, p . 1, as amended ) on common rules for imports from State-trading countries, which provides for the importation without restriction of the products listed in the annex to the regulation, subject to the possibility of the adoption of protective measures, and in Council Regulation No 3420/83 ( Official Journal 1983, L 346, p . 6, as amended ) on import arrangements for products originating in State-trading countries, not liberalized at the Community level . Under the latter regulation, which treats the Benelux countries as though they constituted a single Member State, the Council is required, before 1 December of each year, to lay down the import quotas to be opened by the Member States for the following year . For 1986, which was the relevant year for the facts of this case, import quotas were fixed by Council Decision No 85/648/EEC ( Official Journal 1985, L 382, p . 1 ). The Community has not yet concluded a comprehensive trade agreement with the GDR, as it has done with certain other State-trading countries . I would add that where Member States wish to prevent economic difficulties arising as a result of the importation of goods originating in the GDR which have been directly imported into a Member State other than the Federal Republic, they are required to seek the prior authorization of the Commission under Article 115 for the adoption of surveillance or protective measures ( see, for example, Commission Decision No 87/157/EEC authorizing the French Republic to apply intra-Community surveillance to imports of certain products originating in the GDR which have been put into free circulation in certain Member States, Official Journal 1987, L 65, p . 19 ).

8 . While direct imports from the GDR into Member States other than the Federal Republic are thus regulated at Community level, those Member States have adopted differing arrangements for the importation from the Federal Republic of goods originating in the GDR . In 1975 the Benelux countries adopted a policy under which, in principle, authorizations for such imports were to be refused unless refusal would be incompatible with the interests of good administration . The policy was expressed in a "supplementary instruction" dated 30 June 1975 which was sent to the authorities responsible in each Benelux country for issuing import licences . On 3 July 1975 the instruction was approved by the Benelux subcommittee for commercial policy and thus became part of the Benelux common trade rules .

9 . In the Netherlands, under Article 2 of the Invoerbesluit landen 1981 ( regulation relating to imports from certain countries, Stbl . No 576 ), the importation of goods originating inter alia in the GDR is prohibited other than with the authorization of the competent minister . Article 1(1 ) of the Vrijstellingsbeschikking niet-landbouwgoederen EG 1981 ( order exempting non-agricultural EEC goods, Stcrt . No 253 ) exempts goods put into free circulation in Member States from the requirement that an authorization be obtained . However, Article 1(2 ) of that order provides that the exemption does not apply to goods originating in the GDR . The result is that such goods are subject to the policy adopted by the Benelux countries in 1975 .

The facts of the case

10 . The plaintiff in the main proceedings, Schaefer Shop BV, is a private limited liability company and is the subsidiary of a company incorporated under German law and established in the Federal Republic . Schaefer Shop applied to the competent Netherlands authorities for an authorization to import a quantity of ballpoint pens, leather folders and various office items originating in the GDR, with a total value of DM 40 000 . It appears from the order for reference that the goods in respect of which the import authorization was sought form part of a range of businessmen' s gifts advertised in the "Brigitte" catalogue and which are obtainable in a number of EEC countries through local establishments . Schaefer Shop sought to obtain the goods from a West German company, Brigitte Geschenke GmbH, which had imported them from the GDR .

11 . The application for an import authorization was refused by letter of 4 April 1986 by the Centrale Dienst In - en Uitvoer ( Central Import and Export Office ) acting on behalf of the Minister for Economic Affairs . Schaefer Shop appealed against that refusal to the College van Beroep voor het Bedrijfsleven ( administrative court of last instance in matters of trade and industry ). In defending the proceedings, the Ministry of Economic Affairs pointed out that goods imported into the Federal Republic from the GDR under the system of German internal trade were not subjected to Community customs duties or import quotas and that if such goods were subsequently re-exported to other Member States they were capable of distorting competition and circumventing the import quotas applied to direct imports from the GDR . The refusal to grant an authorization to Schaefer Shop was adopted in pursuance of the common Benelux policy of 1975, under which the Netherlands applied a de facto complete ban on imports from the Federal Republic of goods originating in the GDR except for goods of a limited value and of a non-commercial kind . Since the common policy was the only effective means of dealing with the problems caused by re-exported goods, it must be seen as an "appropriate measure" within the meaning of Paragraph 3 of the Protocol .

12 . Since it considered that the Ministry' s argument raised the question whether the Benelux policy, as thus applied, was compatible with the requirements of the Protocol, the national court, by judgment of 8 January 1988, stayed the proceedings and asked for a preliminary ruling on the following question :

"Is Paragraph 3 of the Protocol on German internal trade and connected problems annexed to the EEC Treaty to be interpreted as meaning that it is compatible therewith for a Member State or a group of Member States to adopt a policy under which, through a ban on the importation without authorization into the Member State or group of Member States of goods originating in the German Democratic Republic which have been brought into free circulation in the Community in the Federal Republic of Germany, all applications for authorizations are, in practice, refused, with the exception of those relating to goods of limited value and of a non-commercial kind?"

The interpretation of the Protocol

13 . The essential question which arises is that of the scope of Member States' discretion to take safeguard measures under Paragraph 3 of the Protocol and in particular whether a de facto complete ban on all categories of imports ( other than those of limited value or of a non-commercial nature ) can be viewed as an "appropriate measure" within the meaning of Paragraph 3 . In interpreting that paragraph, it is appropriate to have regard to its wording, to its place in the scheme of the Protocol taken as a whole, and to the requirements of the principle of proportionality .

14 . As regards the wording of Paragraph 3, it is plain that the power to take appropriate measures is an autonomous one : the provision contains no requirement as to prior authorization, consultation or even information . It is also clear that any measures adopted by a Member State can be preventive and that it is not necessary that difficulties should actually exist before steps are taken . This latter point emerges in particular from the French and Italian language versions which refer respectively to "difficultés pouvant résulter" and "difficoltà eventualmente derivanti" ( emphasis added ).

15 . Paragraph 3 must be read in the context of the Protocol taken as a whole . In its judgment in Case 14/74 Norddeutsches Vieh - und Fleischkontor v Hauptzollamt Hamburg-Jonas (( 1974 )) ECR 899, the Court ruled in regard to Paragraph 1 that :

"These rules aim only at exonerating the Federal Republic of Germany from applying the rules of Community law to German internal trade . The dispensation thus granted does not have the result of making the German Democratic Republic part of the Community, but only that a special system applies to it as a territory which is not part of the Community" ( paragraph 6 ).

That statement was confirmed in Case 23/79 Gefluegelschlachterei Freystadt v Hauptzollamt Hamburg-Jonas (( 1979 )) ECR 2789, as follows :

"... this provision (( i.e . Paragraph 1 )) is intended to relieve the Federal Republic of the obligation to apply the rules of Community law to German internal trade . It accords a special status to the German Democratic Republic as territory which does not form part of the Community but which is not a non-member country vis-à-vis the Federal Republic of Germany" ( paragraph 6 ).

16 . Paragraph 2 is concerned with the implementation of bilateral trade agreements with the GDR and, as pointed out above, under present circumstances relates only to the special system of German internal trade preserved by Paragraph 1 . The paragraph imposes certain obligations on the Federal Republic in connection with that implementation . Thus it is required to inform the other Member States and the Commission of the agreements regulating trade with the GDR and of implementing measures . In addition, the Federal Republic must ensure that the implementation of those agreements does not result in distortions of competition and in particular must take appropriate measures to avoid harm to the economies of the other Member States .

17 . Finally, Paragraph 3 confers a power on the other Member States to take appropriate measures to prevent any difficulties arising for them from trade between another Member State and the GDR . Again, under present circumstances that power relates only to difficulties arising from the operation of the special system of inter-German trade .

18 . From the general scheme of the Protocol outlined above, it is possible to draw certain conclusions which point to an interpretation of Member States' powers under Paragraph 3 which is in principle less restrictive than that which the Court has for instance adopted in relation to Article 115 of the Treaty, a provision which allows for direct derogation from the rules of the common market in relation to goods originating in third countries which are in free circulation within the meaning of Article 10(1 ).

19 . Thus the objective of Paragraph 1 of the Protocol is the preservation of a special trading relationship between the Federal Republic and the GDR which pre-dates the institution of the EEC . It is however no part of such an objective that the GDR should also enjoy, by virtue of the Protocol, a privileged trading relationship with the other Member States . Moreover, in the scheme of the Protocol it is Paragraph 1, rather than Paragraph 3, which constitutes a derogation from Community rules . Paragraph 3 on the other hand, and in part Paragraph 2 also, are concerned with the consequences of the derogation contained in Paragraph 1 . In fact, the precise status of goods imported into the Federal Republic from the GDR under the special system of trade appears indeterminate . While it is the clear intention of Paragraph 1 of the Protocol that such goods are to be assimilated, for the purposes of circulation in the Federal Republic, to goods originating in the Federal Republic, they cannot be regarded as being in free circulation in the Community, since the requirements of Article 10(1 ) of the Treaty, namely compliance with import formalities and payment of customs duties, have not been fulfilled . At the same time, the very existence of powers to take protective measures under Paragraphs 2 and 3 suggests that the Protocol does envisage that the goods are capable of re-export to other Member States . It therefore appears to me that where such goods are re-exported, they have a special status which lies somewhere between that of goods which are in free circulation within the meaning of Article 10(1), and that of goods which are not in free circulation and which are therefore in principle not capable of benefiting from the rules relating to the free movement of goods .

20 . At the same time, consideration of the general scheme of the Protocol points to an important constraint on Member States' powers under Paragraph 3, namely that those powers are of a subsidiary or contingent nature . As already mentioned, the implementation of the special system of inter-German trade is a matter for the Federal Republic, and in that context the Federal Republic must ensure that the system does not result in distortions of competition and must take steps to avoid harm to the economies of the other Member States . It follows from this, in my view, that the primary responsibility for taking any measures to avoid difficulties arising from the operation of the system for the other Member States rests with the Federal Republic, and that in exercising their powers under Paragraph 3 those other Member States must therefore take account of the actual implementation of the system by the Federal Republic and in particular of any measures taken by the Federal Republic to ensure that difficulties do not arise . The same conclusion follows from the terms of Paragraph 3, which empowers Member States to take "appropriate" measures, and from the operation of the principle of proportionality, which is of general application in Community law . That principle, as is well known, requires that the means chosen to achieve an aim must correspond to the importance of the aim and must be no more burdensome than is necessary to achieve that aim .

21 . In this context, the Government of the Federal Republic, supported by the Commission, argues in its written and oral observations that imports from the GDR under the system of German internal trade are so tightly regulated as to both prices and quantities that the re-export of such goods to other Member States is unlikely, other than in isolated cases, to pose problems for those other Member States .

"Paragraph 3 of the Protocol on German internal trade and connected problems must be interpreted as meaning that it is incompatible therewith for a Member State or a group of Member States to adopt a policy whereby, under provisions prohibiting the importation without authorization into the Member State or group of Member States from the Federal Republic of Germany of goods originating in the German Democratic Republic, all applications for authorizations are, in practice, refused with the exception of those relating to goods of limited value and of a non-commercial kind, in circumstances in which the Member State or group of Member States has not established that that policy, having regard to the actual implementation of the system of German internal trade and in particular of any safeguard measures adopted by the Federal Republic of Germany under Paragraph 2 of the Protocol, is necessary in order to prevent difficulties within the meaning of Paragraph 3."

(*) Original language: English.