In Case 7/71
COMMISSION OF THE EUROPEAN COMMUNITIES, represented by its Legal Adviser, Mr J. P. Delahousse, acting as Agent, with an address for service in Luxembourg at the offices of Mr E. Reuter, Legal Adviser, 4 boulevard Royal,
REPUBLIC OF FRANCE, represented by Mr R. Sivan, Ambassador Extraordinary and Plenipotentiary, acting as Agent, assisted by Mr G. de Lacharrière, Minister Plenipotentiary and by Mr Petit, Assistant to the Director of International Relations at the Atomic Energy Commission with an address for service in Luxembourg at the French Embassy, 19-21 rue Notre-Dame,
for a declaration that the Republic of France has failed to comply with its obligations under the Treaty establishing the European Atomic Energy Community by refusing to apply the provisions of Tide Two, Chapter VI of this Treaty,
THE COURT
composed of: R. Lecourt, President, J. Mertens de Wilmars (Rapporteur) and H. Kutscher, Presidents of Chambers, A. M. Donner, A. Trabucchi, R. Monaco and P. Pescatore, Judges,
Advocate-General: K. Roemer
Registrar: A. Van Houtte
gives the following
By Articles 57 to 59, the Treaty regulates the exercise of the right of option, and by Article 64 to 66, that of the exclusive right of the Agency to enter into agreements for the supply of fissile materials coming from their countries. It also regulates certain of the means of cooperation between the Agency and the competent authorities of the Member States. Article 55 requires the Member States to communicate or cause to be communicated to the Agency all the information necessary to enable it to exercise its right of option and its exclusive right to conclude supply contracts. Article 56 requires them to ensure that the Agency may operate freely in their territories, and the third paragraph of Article 70 specifies that the Member States must submit annually to the Commission a report on the development of prospecting and production, on probable reserves and on investments in mining which has been made or is planned in their territories.
Seven years after the entry into force of this Treaty, the Council may confirm these provisions in their entirety. Failing confirmation, new provisions relating to the subject-matter of this Chapter shall be adopted in accordance with the procedure laid down in the preceding paragraph.
This period of seven years expired on
In anticipation of this expiry, the Commission at the session on
Ente Nazionale per l'Energia Elettrica. Comitato Nazionale per l'Energia Nucleare. The Commission reaffirms its view that Chapter VI of the Euratom Treaty relating to supply is still in force. The Commission observes that the direct conclusion of the abovementioned contracts constitutes a default in the obligations arising from the provisions of the said Chapter VI, and in particular of Articles 52 and 64, which give the Agency the exclusive right to conclude contracts relating to the supply of nuclear materials coming from inside the Community or from outside, of Article 57, which gives the Agency a right of option on such materials, and of Article 60, which imposes the obligation on users and producers in the Community to inform the Agency of their respective requirements and offers.
On
The Commission replied to the French Government on
As the observations of the French Government did not satisfy the Commission, it addressed to the French Republic a reasoned opinion dated
Upon hearing the report of the Judge-Rapporteur, and the views of the Advocate-General, the Court decided not to hold a preparatory inquiry.
The parties presented oral argument at the hearing on
The Advocate-General delivered his opinion at the hearing on
The
The refusal of the French Republic to submit to the Commission, after 1964, the annual reports on the development of prospecting and production, on probable reserves and on investment in mining which has been made or is planned on French territory;
The conclusion without the knowledge of the Agency, by the French Atomic Energy Commission of contracts for the importation of
The refusal of the French Commission to notify the Agency of the existence of an agreement on the processing of materials imported from South Africa and the quantities of the materials involved in the corresponding transfer;
Order the French Republic to bear the costs.
The
The submissions and arguments of the parties may be summarized as follows:
The
It does not deny that the import, export and processing contracts were concluded by the AEC without the intervention of the Agency.
The
The words
Nevertheless, even allowing for the widest interpretation of the words
The consequences of exceeding the time-limits set out in Article 76 are twofold: the Council is guilty of a failure to act and the Member States are in an equivocal situation.
Therefore the Council's failure to act is established and the Commission would have been justified in initiating against the Council proceedings for a failure to act under Article 148.
Moreover, implied confirmation would be contrary to the wishes of the Council which undertook to amend the provisions which had become inappropriate in the opinion even of the Commission.
The applicant itself had not made any proposal that the provisions of Chapter VI should be confirmed. In so far as it seems to seek to have these same provisions confirmed by the means of this present action, it is admitting its own failure to act in that it did not submit to the Council any proposal to this effect.
In these circumstances, the Member States were no longer under an obligation to apply the provisions of Chapter VI all the less so as they had in fact become inapplicable. The Court of Justice has ruled that when, because of the failure of a Community institution to act, a Member State finds itself faced with an equivocal legal situation it cannot itself be found guilty of a failure to meet its obligations (Judgment of
The Court has frequently had occasion to make the logical statement that where an institution has failed to take a decision which it ought to have taken, the person to whom this decision should have been addressed cannot be accused of failing to act as though the decision had been taken.
In conclusion the defendant states that in such an equivocal situation it cannot be accused of failing to act as though a decision of confirmation, which the Council did not adopt, had in fact been taken.
The word
Moreover, it is erroneous to interpret the word
This interpretation given by the Court of Justice in its judgment of
The Commission believes that it reconciled its obligation to allow the period of seven years to run as far as possible and the necessity to finish on a date as close as possible to the limit of
The Commission states that although, in view of the delicate issues raised by the future activities of Euratom, it has a more finely judged opinion than the French Government in respect of any failure to act on the part of the Council, nevertheless it agrees that exceeding the time-limits set out in Article 76 established a situation which does not represent a correct application of the Treaty. However it cannot concur with the conclusions the defendant draws from this circumstance.
legal fiction of an implied decision as a consequence of a reasonable period in such an important matter as this is not acceptable. The alternative decisions set out in the second paragraph of Article 76 require in any event an express and formal measure of the Council. The defendant is wrong in arguing that if the authors of the Treaty had intended that the former provisions of Chapter VI should continue to apply after the expiry of the time-limit set out in Article 76, they would have inserted this expressly. The argument rebounds on the defendant. If the authors of the Treaty had intended that the initial provisions should cease to be applicable on Only the idea of provisional applicability ensures sufficient legal continuity for the principle stated in Article 2 of the Treaty and for the logic of the supply scheme which the authors of the Treaty intended to bring closely under Community supervision. The initial provisions set out in Article 222 of the Treaty for the period preceding the entry into service of the Agency confirm that this interpretation is well founded. The scheme of the procedural system set out in the second paragraph of Article 76 also requires the concept of provisional applicability. Indeed the fact that any confirmation may be made by a simple majority decision of the Council in contrast with the requirement of unanimity for the adoption of new rules shows that this confirmation can only, The defendant s objection that the provisional applicability defended by the Commission is comparable to an implied decision of ratification must be rejected. As from
It states that the expressions used in Article 76 rule out the possibility that the authors of the Treaty intended to set out the starting point for the possible use of the procedure for the amendment of Chapter VI.
In its view there was nothing to prevent these amendments being adopted before
This difference of opinion could not be resolved by condemning one of the opinions as the Council alone could say whether the former provisions should have been retained or not after more than six years. There was, therefore, an equivocal situation and a Member State could not be required to apply a rule which, for lack of confirmation, was clearly no longer applicable.
Whereas the provisions of the Treaty were written in the perspective of a period of shortage of uranium which justified the setting up of the Agency, a surplus of natural uranium has subsequently appeared on the world market. Furthermore, the United States has authorized the export of enriched uranium for civil purposes. These circumstances have caused the Community to give up its idea of undertaking a long-term supply policy as the Member States preferred to rely for their supplies on the agreement concluded in 1958 between the United States and Euratom. France on the other hand, anxious not to be dependent on a foreign monopoly, decided to establish an isotope separation plant itself. From this time it became impossible to apply the original provisions of Chapter VI In these circumstances the Commission openly gave up effectively applying Chapter VI. It encouraged the purchase of natural uranium on the international market by stating, in contravention of Article 60 of the Treaty, that purchasing contracts would be It refrained from applying Articles 70 and 72 (on the building up of stocks) of the Treaty. The Agency merely played a purely formal role in the conclusion of supply contracts for enriched uranium granted by the American Atomic Energy Commission which held an absolute monopoly for such supplies. Since the Commission itself had to give up the application of Chapter VI if only in a partial and purely formal manner, the defendant deduces that it cannot be found guilty of any default. Moreover no Member State had suffered any substantial economic prejudice from the attitude of France.
Chapter VI and in particular the system of joint purchase was not conceived solely in order to deal with a shortage situation (cf. first paragraph of Article 76). This system, which was in the first place based upon the satisfaction of the needs of consumers in order to supply them at the market price (Article 67) precisely enabled this objective to be achieved. The agreement concluded with the USA in 1958 enabled Europe to be supplied with enriched uranium on good terms. The fact that, according to the applicant, France built its own isotope separation plant to cover the requirements resulting from its military programme in no way affects the interest which existed from the beginning and still exists in dealing with the American monopoly through a system of joint buying. Moreover Chapter VI is an indispensible panel of the triptych, common supply, supervision and ownership, of special fissile materials. The Commission was actively working towards the effectiveness of the safeguard against diversion set out in Chapter VII of the Treaty. Moreover, the Commission did not fail to prepare a long term common supply policy even if, for reasons of price, it was unable to accept in 1959 an offer from the French Commission for the supply of enriched uranium. The fact that the Agency has the exclusive right to conclude supply contracts in no way implies that operators on the market have lost their freedom of judgment. In response to the almost unanimous concern of the interested parties, the Regulation of For supplies of natural uranium and of thorium, taking into account a period where supply was particularly abundant, Article 5 of the Regulation of Negotiation is only left to the users under the double condition that they respect the general conditions issued by the Agency relating to the content of contracts and. that they submit these contracts to the Agency which, without being strictly speaking a party, is deemed to conclude them if it does not object to them within eight days. This substantial formality, without which the contracts are void on the ground of public policy, is a means of exercising the exclusive right granted to the Agency by Article 52 of the Treaty. For special fissile materials the role of the Agency essentially consists in assuming control of deliveries made under the agreement between Euratom and the United States. To the complaints of the French Government that the balancing of supply and demand was not applied in this sector, it may be replied that each negotiation by the Community for the revision of the quantitative limits set in the American agreement was always preceded by careful investigations by the Agency amongst the users in the Community who were enabled in good time to make forecasts as to their needs. The negotiation of the conditions applicable was therefore made in tripartite form (USAEC, Agency, users). In addition demands from the users did not exceed the maximum available under the Euratom United States Agreement. In this respect the Commission states that it did not authorize the conclusion of contracts establishing commitments of twenty to twenty-five years to the American seller without possibility of giving notice of termination. The fact that me Commission proposed an amendment to Chapter VI in no way implies that the provisions of that chapter had no scope and were of no use. Moreover, the proposal left intact the basis of Chapter VI. The Agency achieved constant improvement of the supply conditions from both legal and commercial standpoints. To the argument invoked by the French Government as to the absence of prejudice resulting from the position of that government, the Comission further replies that the French decision breached the unanimity of action which the Member States sought to ensure by establishing the Community, particularly in the area of supply policy in external markets which could also place the relevant undertakings of other Member States in a position of serious inequality. The Commission concludes by stating that by encouraging its nationals to evade the application of Chapter VI the French Republic established a discriminatory situation to which the Commission was under an obligation to put an end.
Furthermore, the methods adopted by the Agency proved unfavourable with regard to the guaranteeing of a regular supply to the Community. By systematically accepting the conclusion, by the users, of 20-25 year supply contracts, the Agency permitted the rapid exhaustion of the global quota which the USAEC had undertaken to supply under the Euratom-United States agreement. The reply of the Commission that these contracts contain clauses for giving notice in compensation for the length of the contracts neglects to mention that this right of giving notice was provided only in favour of the users and not of the Agency itself. The links set up by Euratom and the practices of the Agency reveal themselves to be extremely unfavourable not only for the users but also for Community producers. Indeed in a market situation where supply exceeds demand, the Agency should have taken care to preserve the legitimate interests of the Community producers by granting to them, in the basis of an equal price, preference over their foreign competitors. This was not done by the Agency. Finally, the provisions of Chapter VI are in no way indispensable to the efficient functioning of the safeguard laid down in Chapter VII since the provisions of this chapter are self-sufficient. For natural uranium the simplified procedure leads to a renunciation of the balancing of supply and demand provided for by Article 60 and excludes the possibility of granting on the basis of equal prices preference to marketing goods produced within the Community. Far from ensuring the transparency of the market as it was obliged to do by the Treaty, the Agency, by adopting the simplified procedure, achieved the opposite. Moreover, the defendant alleges that in practice, the Agency never exercised the diminished power of supervision remaining to it under the Regulation of 1960, particularly by the possibility of rejecting certain contracts. Moreover, in a note of With regard to special fissile materials, too, there was no balancing of supply and demand; thus in particular one Member State had been able to obtain from the United States the chance of acquiring uranium for stockpiling without the Agency's informing other users who might have been interested in a similar contract. Finally, thanks to the efforts of certain Member States in the field of prospecting, the Community was no longer reliant on third countries, thus rendering superfluous the written provisions relating to a situation of shortages and the necessity of external supply. From this the defendant deduces that the Commission had no interest in taking proceedings since it did not itself apply provisions which had in fact become inapplicable.
For a long time the Commission has thought that the procedure under the second paragraph of Article 76 would succeed. It was only in a letter of
Whilst it had the right to initiate proceedings as from this moment the Commission did not do so because of the small practical importance of this default. On the contrary, when the supervisory department in 1968 revealed the existence of transactions done without the knowledge of the Agency, this fact caused the Commission to initiate the procedure by way of a reasoned opinion.
The Commission used the action founded on a failure to fulfil an obligation rather than the action for failure to act because the results are different. Failure to act recognized by the Court of Justice would place the Council under an obligation to act while the condemnation of the defendant in the present case would mean that Chapter VI has remained applicable although unconfirmed. The attainment of such an objective is inadmissible as it is for the Council alone to rule on the scheme to be applied. The Commission itself sees in the provisional retention of the situation an opportunity to maintain a monopoly which most of the countries of the western world have, however, renounced.
The Commission states that it is not seeking to urge the Court of Justice to substitute itself for the Council because the decision of the Court only applies on a temporary basis until the Council takes its decision. The Commission is merely concerned with ensuring the application of the Treaty.
On those grounds,
THE COURT
hereby rules:
by failing to notify to the Supply Agency the existence of an undertaking relating to the processing of uranium imported from South Africa and the quantities involved in the delivery in question,
the French Republic has failed to fulfil its obligations under Tide II, Chapter VI, of the Treaty establishing the European Atomic Energy Community, especially Articles 52, 55, 57, 64 and 75;
Lecourt
Mertens de Wilmars
Kutscher
Donner
Trabucchi
Monaco
Pescatore
Delivered in open court in Luxembourg on
A. Van Houtte
Registrar
R. Lecourt
President