In Joined Cases 116/77 and 124/77,
G. R. AMYLUM N.V., Aalst, Belgium, represented by Michel Waelbroeck and Georges Vandersanden, Advocates, 341 Avenue Louise, Brussels, with an address for service in Luxembourg at the Chambers of Ernest Arendt, 34 Rue Philippe II,
and
TUNNEL REFINERIES LIMITED, London, represented by Francis Jacobs, Barrister, Middle Temple, instructed by Messrs Slaughter and May, Solicitors, 35 Basinghall Street, London EC2V 5DB, with an address for service in Luxembourg at the office of Messrs Elvinger and Huss, 84, Grand Rue,
COUNCIL OF THE EUROPEAN COMMUNITIES, represented by Daniel Vignes, Director in the Legal Department, acting as Agent, assisted by A. Brautigam, a member of the said department, with an address for service in Luxembourg at the office of J. N. van den Houten, Director of the Legal Department of the European Investment Bank, 2 Place de Metz,
and
COMMISSION OF THE EUROPEAN COMMUNITIES, represented in Case 116/77 by its Legal Adviser, Jacques Delmoly, a member of the Legal Department, and in Case 124/77 by Richard Wainwright, acting as Agent, assisted by Hendrik Bronkhorst, a member of the Legal Department, with an address for service in Luxembourg at the office of Mario Cervino, a member of the Commission's Legal Department, Jean Monnet Building, Kirchberg,
APPLICATIONS for damages under Article 178 and the second paragraph of Article 215 of the EEC Treaty,
THE COURT,
composed of: H. Kutscher, President, A. O'Keeffe and A. Touffait (Presidents of Chambers), J. Menens de Wilmars, Lord Mackenzie Stuart, G. Bosco and T. Koopmans, Judges,
Advocate General: G. Reischl
Registrar: A. Van Houtte
gives the following
Glucose having a high fructose content (
The applicants in these cases are starch manufacturers who have made heavy investments to allow them to produce isoglucose.
In view of the growing industrial production of isoglucose in several Member States of the Community, the Council decided to lay down common measures applicable to that product. Those measures were adopted by Council Regulation (EEC) No 1111/77 of
The recitals in the preamble to that regulation contain amongst other things the following passages:
The system for production levies for isoglucose is laid down by Articles 8 and 9 of the regulation and applies to periods corresponding to the sugar marketing years 1977/78 and 1978/79.
By Article 9 the amount of the production levy is, per 100 kg of dry matter, equal to the amount of the production levy for sugar provided for in Article 27 of Regulation (EEC) No 3330/74 of the Council of
For the period from
Article 9 (3) provides that detailed rules for the application of the provisions concerning the production levy are to be adopted in accordance with the Management Committee procedure.
These detailed rules formed the subject of Commission Regulation (EEC) No 1468/77 of
Council Regulation (EEC) No 1110/77 of
G. R. Amylum N.V. on
Tunnel Refineries Limited commenced proceedings on
By an order of
By an application lodged at the Court on
By an order of
Upon hearing the report of the Judge-Rapporteur and the views of the Advocate General the Court decided to open the oral procedure after the defendants had been requested to answer certain questions (which are set out under heading IV below). At this stage, the oral procedure is confined to the question of liability on the part of the Community, reserving any questions as to the causation of the damage and the nature and scope of the damage.
The
Rule that the Community has incurred liability in respect of the adoption of Council Regulation No 1111/77 and Commission Regulation No 1468/77;
Award the applicant, as compensation for the damage suffered, a sum provisionally set at BF 777 million;
Order the defendants to bear the costs;
Appoint an expert responsible for assessing the amount of the damage suffered by the applicant as a result of the adoption of the aforementioned regulation;
Reserve the costs in that connexion.
The
The
In its defence, the
In its
The applicant states that isoglucose is offered to industry at a price 5 to 7 % lower than that of sugar, which is justified
Until 1976/77, approximately 70 % of the isoglucose manufactured by the applicant was derived from maize and approximately 30 % from common wheat. The maize is imported from other Community countries, in particular France, to the extent to which it is available. The balance is imported from non-Member countries (chiefly the United States). The applicant has adapted its manufacturing process and its unloading equipment in order to receive North Loire maize sent by complete train-loads. These investments received aid from the European Agricultural Guidance and Guarantee Fund (EAGGF) (Commission Decision COM (73) 400 def/00053 of
The applicant challenges the system of production levies on isoglucose which was introduced by Articles 8 and 9 of Council Regulation No 1111/77 and which, in the applicant's submission, unjustly penalizes it as an isoglucose manufacturer in favour of sugar producers. The consequences of that legislation are so catastrophic for the applicant that they will inescapably lead to the closure of its isoglucose production unit.
The applicant acknowledges that the contested measures are measures of economic policy which imply a certain amount of discretion on the part of the institutions which adopted them. Consequently, according to wellestablished case-law of the Court of Justice, it is incumbent upon it to show that a serious breach of a superior rule of law for the protection of the individual has occurred.
It is also incumbent on the applicant to prove that it has actually suffered damage, to assess the amount thereof and to prove the connexion between that damage and the wrongful act committed by the Community authorities in adopting the contested legislation.
Serious breach of a superior rule of law for the protection of the individual
In the applicant's submission, the rules on production levies on isoglucose laid down in the disputed regulations violate the following principles of Community law:
The prohibition on any discrimination between producers within the Community (second subparagraph of Article 40 (3) of the Treaty) ;
The obligation to comply with the objectives laid down in Article 39 (1) of the Treaty;
Observance of fundamental rights, in particular the right of freedom to pursue an industrial or commercial activity;
Observance of the principle of proportionality.
The applicant argues that if the levy system applying to the manufacture of sugar is carefully compared with that laid down by Regulation No 1111/77 for isoglucose, it is found that, far from being confined to compensating for alleged economic advantage by provid for a contribution by isoglucose export costs, Regulation No 1111 heavily penalizes isoglucose production in comparison with that of sugar, to the point of making the former complete uneconomic. In fact:
On the other hand, the isoglucose levy is due on all the quantities produced. Consequently, even if it is limited to five units of account per 100 kg, the isoglucose levy is much more onerous for a manufacturer than the sugar levy.
That discrimination appears even greater if account is taken of the fact that it is rare for manufacturers to exhaust their maximum quota. As emerges from the table (in an appendix to the application) taken from the publication
The applicant gives sample figures to show that although the maximum amount of the levy borne by a sugar producer is
The actual amount of the production levy borne by an isoglucose manufacturer is thus at least five times higher than the maximum amount for which a sugar manufacturer is liable. On the basis of the results of the last sugar marketing year, the amount is more than 25 times higher.
Therefore it is clear that the levy on isoglucose does not stop at establishing equilibrium between that product and sugar as regards contribution to the costs of exporting sugar but actually penalizes production of isoglucose. Nor can such penalization be justified by an undue advantage allegedly enjoyed by isoglucose over sugar. Since refunds on the production of starch used in the manufacture of isoglucose were abolished by Council Regulation No 1862/76 of
The applicant argues that even if the objective of the contested legislation was, contrary to what appears in the statement of the reasons on which Regulation No 1111/77 is based, to protect sugar beet growers and sugar manufacturers from competition by isoglucose, discrimination in favour of the latter to the detriment of isoglucose producers is contrary to each of the objectives of the common agricultural policy as stated in Article 39 (1) of the Treaty. In fact:
Therefore the Commission and the Council have taken
The applicant states that prior to the adoption of Regulation No 1111 /77 it had drawn the attention of the Commission to the impossible situation which would confront it if the regulation were adopted. The applicant adds that the Commission's Directorate-General for Internal Market and Industrial Affairs sent two inspectors to the applicant's registered office in order to ascertain the production cost of isoglucose.
The applicant states that the study carried out by the officials concerned in January 1977 led to the conclusion
The production levy provided for by Article 9 of Regulation No 1111/77 is in principle the same as that provided for in Article 27 of Regulation No 3330/74. Even if account is taken of the fact that for the year 1977/78 the levy is limited to five units of account, that still represents
In its judgment in Case
If the objective of the Council and the Commission in adopting Regulation No 1111 /77 was to put manufacturers of sugar and manufacturers of isoglucose on the same footing in relation to the costs resulting from surpluses, it is clear, in the applicant's submission, that the measure adopted is excessive in relation to the aim pursued. In fact it would have been sufficient to subject isoglucose production to a levy the real amount of which was equivalent to that of the levy on sugar production.
Even if the objective pursued was to protect sugar production against isoglucose, the threat by isoglucose to the outlets for sugar did not justify the adoption of such a protectionist measure. In fact, isoglucose can be substituted only for liquid sugar. The Commission has stated that the quantities of saccharose marketed in the form of liquid sugar at present represent
The applicant states that the entry into force of the contested legislation will force it to terminate its activities. It states that it has invested BF 257 million in the construction of its isoglucose production unit.
The applicant states that, in addition, a large part of the first-stage plant will cease to be of any use under normal conditions of profitability. This head of damage may be assessed at BF 500 million.
Taking into account the considerable investments made by it, the difficulties involved in reconvening them to other activities and the compensation which will have to be paid to staff in years to come, the total damage suffered by the applicant may be provisionally assessed at BF 777 million. Although that damage has not yet actually occurred, it is sufficiently imminent and foreseeable with sufficient certainty to be able to found a claim for compensation (cf. Joined Cases
The applicant submits that it is patent that if the contested legislation had not been adopted, it could have continued its business normally.
In its
According to the most recent data (November 1977) at the Commission's disposal, the total production of white sugar in the Community for the sugar marketing year 1977/78 amounts to
As regards isoglucose, the Commission briefly sets out the properties and uses of the product and states that the estimated capacity for isoglucose production within the Community at the end of 1976 was approximately
In conclusion, the Commission emphasizes
The potential market for isoglucose is not limited to the so-called liquid sugar market, for the simple reason that that market does not exist as such: in fact many consumers prefer to buy sugar in the solid state and dissolve it themselves, in view of the difficulties of storing saccharose syrups. Thus the Commission considers that a more accurate estimate of the potential uses for isoglucose is 30 % of the sugar market, that is 3 million tonnes.
Finally, because isoglucose is in direct competition with saccharose syrups, its market price tends to align itself on the market price for sugar, that is to say in fact on the intervention price for sugar.
The Commission emphasizes the scope and significance of two component parts of the common organization of the market in sugar, namely the quota system and the production levy.
The Commission contends that, as regards the system to be applied to
To do nothing and thus to allow
To lay down a scheme identical in every respect to the one existing for sugar;
Finally, without prejudice to the future, to adopt provisional measures designed to introduce fair conditions of competition for both products.
The Community chose the third solution. In fact, the essential feature of the
The Commission contends that one of the necessary and essential requirements for any non-contractual liability
The Commission points out that the applicant invokes only
On this point the Commission refers to the judgments of the Court in Joined Cases 56 to 60/74
Distinguishing betweendamage in the sense of
The Commission analyses the fundamental differences which, in its contention, exist between the situations underlying the two cases cited and the present case, and summarizes its position on the question of the certainty of the damage invoked by the applicant as follows :
The damage (
At all events, the alleged damage (
The Commission examines from the points of view the question of the
The Commission argues that from the point of view of the theory of
From the point of view of the theory of
On this point, the Commission concludes that, on any view of causality, the causal connexion pleaded by the applicant between its alleged damage and the Community legislation at issue is lacking any directness. Furthermore, the reasons given to support that ground of complaint are insufficient for the purposes of Article 39 (1) (c) of the Rules of Procedure of the Court, and for that reason alone make the application inadmissible.
For all these reasons, the Commission contends that the application in the present case should be declared inadmissible for lack of any certainty or directness in the damage pleaded. Should the Court choose to consider the substance of the question, the Commission persists in its arguments and concludes that the application should at least be dismissed as unfounded, for the same reasons.
The Commission argues that those objectives cannot be described as
Furthermore, as is acknowledged by established case-law (see in particular the judgment of the Court of
In the present case, the Commission merely observes that the common measures adopted for isoglucose are essentially designed to stabilize the market in sugar which at the present time has a large surplus.
At this point in its defence the Commission proposes to examine this question under the heading of the principle of proportionality.
The Commission contends that the complaint of discrimination, taken as meaning treatment of identical or at least comparable situations in a different way not justified by objective criteria, requires the terms of the comparison themselves to be defined beforehand. In that connexion, the Commission argues in particular that if the comparison is to be made between things which are economically comparable, the general and purely quantitative approach of the applicant should be abandoned in order to examine the real situation of the two sectors, sugar and isoglucose.
By means of the following sample figures, the Commission seeks to show that there is no discrimination between a producer of isoglucose and a producer of sugar in equally efficient conditions of production.
To take the example of a sugar undertaking whose production of C sugar amounted to
A Production:
B Production:
C Production:
Intervention price:
Production levy (sugar year 1977/78):
Price of B sugar:
Price of C sugar: ± 10 u.a. per 100 kg
(average forecast for sugar year 1977/1978)
Return on sugar
Average price for the producer
Difference
Thus the difference of
The Commission recalls the two objectives of the production levy on isoglucose, namely: to make isoglucose producers bear part of the extra costs resulting for the Community from the arrival of the new product on the market; to control the production of isoglucose by reference to the production of sugar and to the availability of market outlets.
As regards the
The
Owing to the introduction of the production levy on isoglucose by Regulation No 1111/77, the applicant is compelled to produce isoglucose at a loss for the coming twelve months and to make a further outlay of some £
Firstly, the regulation violated the principle of proportionality in that it imposed a wholly unfair burden on the manufacturers of isoglucose in the interests of manufacture of sugar. Indeed, the isoglucose levy is wholly disproportionate and excessive both in relation to the comparative burden on sugar producers and in relation to the object of the measure in question. The object of the levy is stated, in the preamble to the regulation, to be
Secondly, the regulation contained no provisions, and no provisions have been adopted in implementation of the regulation, to protect the legitimate expectations of the applicant, who had made investment decisions in reliance upon a Community policy which had been consistently followed over a period of years.
Thirdly, the regulation infringes the Treaty in that its provisions either fail to meet or are contrary to one or all of the objectives of the common agricultural policy as set out in Article 39 of the Treaty. In particular, the regulation has the opposite effect to that of ensuring the availability of supplies (Article 39 (1) (d) of the Treaty). Although there is at present an artificially-generated surplus of sugar in the Community, it is manifest that such a surplus may be a temporar) phenomenon and indeed there have recently been periods of acute shortage of sugar.
Fourthly, the regulation infringes the Treaty in that it embodies a gross form of discrimination contrary of Article 40 (3) of the Treaty. While purporting to give similar treatment to isoglucose and sugar by relating the tax to the levy payable on B Quota sugar, the regulation in fact discriminates blatantly against isoglucose producers in making no allowance for the equivalent of an A Quota under which very substantial quantities of sugar can be sold at guaranteed prices. Furthermore, the production levy on sugar is payable on only a small proportion of the total production, especially if account is taken of the fact that the maximum quota is rarely filled.
Finally, the excessive and disproportionate character of the tax on isoglucose is demonstrated by the fact that its effect is to render the production of isoglucose uneconomic in relation to sugar.
Since the tax imposed on the production of. isoglucose is manifestly disproportionate and excessive, the inescapable inference appears to be that the defendants sought by means of the levy to offset the real or supposed competitive advantage of isoglucose, and to this end sought to assess the production costs of isoglucose and the potential market for the product. If that inference is correct, then the defendants have manifestly misused their powers in imposing the levy.
If that inference is correct, or if, contrary to the applicant's submission, the defendants were entitled to take account of the production costs for isoglucose and the potential market for the product, then the regulation was vitiated by reason of being based upon wholly erroneous premises in the following respects:
In the first place, the applicant submits on the one hand that at the time when the Commission submitted to the Council the proposal upon which the regulation was based the Commission had no adequate information upon which to base the rate of the levy or alternatively that having such information it failed to take proper account of it, and on the other hand that both the rate proposed by the Commission and the rate fixed by the Council were decided entirely arbitrarily and without regard to the costs of the production of isoglucose. The applicant requests the Court to order the defendants to produce the figures and calculations on which the rate of the levy was initially proposed by the Commission and subsequently fixed by the Council.
Secondly, the regulation was based on a wholly erroneous assessment of the role of isoglucose and of the potential market for the product, for which again the applicant submits that the Council and the Commission are jointly responsible. The applicant requests the Court to order the defendants to produce the information available to them in these respects at the material times.
In support of these submissions the applicant relies on the following:
According to the information available to the applicant, the production capacity for isoglucose in the EEC was estimated in November 1976 to be
The applicant submits that the Council and the Commission were misled by figures produced on behalf of beet sugar producers which suggested that one million tonnes of isoglucose would be produced in the medium term and which also suggested that isoglucose and sugar were in many respects interchangeable in practice (see the extract from the
Even in the principal market, namely the soft drinks industry, isoglucose is not a complete substitute for sugar, since changes in sweetness and flavour would be apparent if it were so used. In practice, therefore, users will use up to 50 % isoglucose to replace up to 50 % of the sucrose normally used.
For
The damages which the applicant seeks to recover are those caused directly to the applicant as a result of the imposition of the tax on the production of isoglucose by the above-mentioned regulation, including in particular:
The applicant states that it will give particulars of the damages in question.
In its
It states that it has grave doubts on the admissibility of the application since there appear to be lacking two essential elements which are necessary before there can be any question of liability under the second paragraph of Article 215 of the Treaty: namely the certainty of the damage and the directness of the causal link between this damage and the fault alleged.
In its
With regard to the
With regard to the
In answer to the complaint of the two applicants that Regulation No 1111/77 is not in accordance with the
However that may be, the Council does not consider that the economic choices resulting from its application of Article 39 are in any way open to reproach.
The Council then deals with a series of objections to the fixing of the levy on isoglucose at
As regards the first objection (which is common to both applications) that
As regards the applicants' comparison between the amount of the isoglucose levy of
In reality the rate of the sugar levy is by no means the same in all sugar refineries. This is due partly to the method of allocating quotas to sugar refineries and partly to the division of each undertaking's quota between the three price systems (A, B and C). Because of various circumstances, the quota system will have quite different effects from one sugar refinery to another. Thus one sugar refinery may produce not only its basic quota but also its B Quota and even some C sugar. Even if the C sugar is sold at a marginal price, it will none the less increase the total revenue of the undertaking. Although the undertaking pays the maximum production levy on its B Quota, it will still have the highest returns. Another refinery, on the other hand, may barely succeed in producing its A Quota. In that case, almost its entire production will be paid for at the A sugar price, that is to say at a higher price per kilogram manufactured than the produce of the first refinery, but the total income of the latter will be higher. Moreover, if it produces only one-third of its B Quota it will pay a lower levy but its total income will still be lower.
When comparing two sugar refineries what matters most is therefore not the rate of the sugar levy paid, whether this is calculated on the basis of total production or by some other method, but rather the total profit made after deduction of the levy on B sugar and the sale of all the sugar, some at the intervention price (A and B Quotas) and some at the world price (C sugar).
In support of its argument, the Council puts forward sample figures showing that the advantage goes to the undertaking which pays the higher levy and not the undertaking paying a lower rate.
Therefore the comparison made by the applicants between the levy rates for sugar and isoglucose is invalid.
The Council mentions that sugar manufacturers have a maximum quota made up of two tranches, namely the Quota A tranche which is guaranteed the full intervention price and the Quota B tranche which is approximately equal to one-third of Quota A (35 %) and is guaranteed only the intervention price reduced by the amount of the levy. In other words, sugar producers are guaranteed the intervention price reduced by a
It remains to be determined whether absolute equality of the systems is necessary. The applicants have not begun to answer any of the three questions which arise in this respect:
Is the competition of use between the two products sufficient to ground absolute equality of systems between them?
Is it possible now to determine once and for all the connexion between the systems when the production of isoglucose is likely to increase by 500 % in the near future, which will put the problem in a new setting?
Would equality of systems ensure the same remuneration?
It might on the contrary be claimed that since the production of isoglucose is complementary to existing sugar production it is perfectly logical that it should be subject to the constraints of that part of sugar production (B sugar) which is additional to the part judged necessary to cover the normal needs of the Community and which, because of this, benefits from all Community guarantees (A sugar) (cf. the seventh recital in the preamble to Regulation No 1111/77).
Article 39 of the Treaty states that one of the objectives of the common agricultural policy is to
The charge of discrimination is not then valid.
The Council contends that the statement of the reasons on which Regulation No 1111/77 is based suffices as a reply to the charge of misuse of powers made by the applicant in Case 124/77. It is because isoglucose is subject to the advantages and constraints of the sugar market organization that it must contribute to the costs of this organization. Such a contribution therefore seems a normal
The Council continues its arguments by asserting on the one hand that the selling price of the two products is virtually the same, the selling price of isoglucose approaching to within 2 or 3 % the intervention price of sugar, and on the other hand that it has by no means been established that the cost price of isoglucose is at as high a level as that of sugar and thus that the levy which has been fixed cannot be borne by isoglucose. In connexion with the latter point, the Council mentions the principle of law that it is
Be that as it may, the prices for the current marketing years (1976/1977 and 1977/1978) being what they are and taking into account the net cost of raw materials and the considerable profits on the sale of by-products (particularly high for isoglucose) maize is more profitable than sugar beet per tonne of sugar or equivalent thereof. In particular, for 1977/1978 the amount of the isoglucose levy (five units of account per 100 kg) can quite easily be absorbed.
Thus there is nothing discriminatory or disproportionate in imposing the sugar levy on the whole production of isoglucose when sugar only pays it on the B Quota, since the levy represents a balance sought between two products and takes account of their respective cost prices. The objection that the calculation has no basis is also unfounded.
Finally in this connexion, the Council submits that any slight handicap which it might have imposed on isoglucose producers was minimal and perfectly justifiable within the framework of the common agricultural policy under which a burden can be imposed on traders in the general interest.
The Council submits that further claims are the consequence of a faulty interpretation of statistics and for that reason must likewise be dismissed.
This applies to the
The Council contends that the flaw in this argument is that it is based on a glaring under-estimate of potential isoglucose consumption. In the Community's opinion, which is based on highly reliable studies, isoglucose could shortly reach a sales potential of as much as 33 % of total sugar consumption (to be more precise the figure would lie between 19 and 33 %, say 25 % for the sake of argument). Potential uses, in addition to replacing the 10 % (and not 7 %) of total sugar production now accounted for by liquid sugar, must include replacing the solid sugar which liquid sugar users turn into a solution as the need arises and the possible addition of isoglucose to certain heated preparations. This would give a total of 25 % of the market. The potential market percentage for isoglucose, which at present stands at
To conclude, since isoglucose is still far from realizing its full sales potential and the Community was justified in wishing to establish a balance between sugar and isoglucose, the adoption at this stage of a measure designed to ensure that this balance would be achieved gradually was by no means disproportionate.
As far as the accusation of violating
As regards the complaints of violating
As regards the admissibility of the application, the
Referring to an isolated essay on legal theory, the Commission purports to draw a distinction between the concept of damage in the sense of
If the Court had wished to draw a distinction between damage in the sense of
In the present case, it is clear that the conditions for future damage, in the sense decided by the Court in its case-law, to be accepted as the basis of an action in non-contractual liability are fulfilled. The obligation to pay the production levy on isoglucose at the excessive rate imposed by the legislation at issue will inevitably force the applicant to terminate its investments in that field and before long to put an end to its production activity. In that connexion, the applicant states that it is prepared to provide the Court with any evidence, including supporting figures, which may be deemed necessary.
The applicant fails to understand how the Commission can express any doubts on this point. The Commission does not give the least indication of the
Liability for wrongful act or omission does not, as the Council contends, require proof of special damage. That would be the case only where special and abnormally severe damage had been suffered by an individual as the result of an administrative measure not vitiated by a wrongful act or omission. Consequently it is only where liability without fault is at issue that special and abnormally severe damage has to be proved.
Turning to the question of the
Referring to the theory of the
The applicant points out in general that if the arguments advanced by the defendants to. the effect that the application is inadmissible were accepted, they would have the effect of considerably reducing the scope for individuals to bring actions in non-contractual liability before the Court of Justice. In this instance, the object of the action is precisely to obtain compensation for the damage occasioned by the application of the disputed regulations to the applicant, namely the closure of its isoglucose factory; the object is not to obtain, in the form of an award of damages, what is in reality only a reimbursement of the levies paid under those regulations.
The applicant argues
In short, the applicant wonders whether the Community's intention in sacrificing the isoglucose industry is to leave the present sugar producers with a monopoly in a market which they may perhaps themselves convert to isoglucose production. In that connexion, the applicant refers to the negotiations between the Netherlands producer Centrale Suiker Maatschappij and the representative of Koninklijke Scholten-Honig which were reported in the Press. At the present time, there are grounds for thinking that certain large-scale sugar producers are showing interest in taking a hand in isoglucose production.
The applicant points out that even if it was not the Council's intention to put an end to the applicant's activity, the contested regulation will have that effect. Observance of a right, especially a fundamental Community right, must be judged from the point of view of the effect in relation to the objective pursued.
The applicant challenges in particular what it sees as an attempt on the part of the Commission to minimize the difference of treatment between isoglucose and sugar by arguing from isolated individual cases. Indeed the Commission put forward an example in which production of C sugar amounted to
Since it is a matter of assessing whether the system introduced by Regulation No 1111/77 penalizes isoglucose producers as against sugar producers, the applicant submits that the basis should be average values. As the applicant stated in its application, from 1971 to 1976 the actual B Quota varied between
A Sugar production:
B sugar production:
C sugar production:
Intervention price:
Production levy:
Price of B sugar:
Return on sugar
Average price for the producer:
Difference:
That is to say
The applicant adds that even that calculation does not take account in particular of the fact that 60 % of the burden represented by the levy on B sugar is actually passed on to sugar-beet producers.
In a supplement to its reply, the applicant states that it has evidence that the example given by the Commission is quite exceptional. The figures quoted by the Commission correspond to those which appear in the 1976 annual report of the
The applicant refers to the Commission's statement that one of the objectives of the contested legislation is to
Should the Court hold that it is in accordance with the Treaty deliberately to restrain production of one product in order to favour disposal of a competing product on the market, the applicant relies in the alternative on its complaint with regard to violation of the principle of proportionality.
The applicant contests the statements both of the Commission and of the Council as to the facts in many respects.
Isoglucose is not, as the Commission states, simply a substitute for sugar, since it can be substituted
No shred of evidence is produced by the Commission to support its estimate that the potential market in the long term for isoglucose might amount to as much as 30 % of the total Community sugar market.
Contrary to various statements by the Commission and the Council to the effect that they lacked information on the subject, the applicant and doubtless also other manufacturers of isoglucose were at all stages prepared to co-operate with the Commission and to provide full information on their production costs. Thus for example, on
Since the investment was planned, the withdrawal of production restitution has reduced expected profit by £
(£ per tonne dry solids basis)
Since the investment was planned, the withdrawal of production restitution has reduced expected profit by £
(£ per tonne dry solids basis)
The applicant accuses the Council and the Commission of presenting, in their defences, only a fragmentary picture of the Community sugar market and in particular of not giving details of the crucial questions which relate to the B Quota levy, on which the levy on isoglucose was based.
It argues that the information provided by the Commission together with some published statistics (
Finally the applicant contests the Commission's two arguments relating to the supposed benefit to isoglucose of the guaranteed price for sugar and to the contribution to Community export costs. The applicant observes that in any event the two arguments cannot be used cumulatively.
The applicant comments on certain submissions of law made by the defendants concerning in particular the following points:
The applicant argues
In the applicant's submission it is for the Community sugar system to stabilize the sugar market, and the Community authorities having patently failed to stabilize that market, and having generated large surpluses at high prices, cannot legitimately seek to remedy the situation by penalizing the production of isoglucose.
The sooner the illegality of the regulation is established and the levy eliminated, the less damage will be done to the applicant. Consequently the applicant has a legal obligation to introduce proceedings at an early stage in order to mitigate the damage and would be acting improperly if it waited for several years' losses to accrue before taking action.
As regards the certainty of the future damage, the applicant submits that it is already shown (see Annex I to the reply) that the result of the imposition of the levy on the production of isoglucose would be to make such production uneconomic. It should thus be apparent that as a result the applicant is obliged to phase out the production of isoglucose and will be obliged unless the regulation is repealed to write off its investment costs. The applicant is unable to see how it can be alleged to have failed to substantiate both the certainty of the damage and its direct causal nexus with the regulation challenged.
In its
After remarking that the applicant in Case 143/77 unlike the other two applicants had submitted the first piece of evidence that there was a causal link between the alleged damage suffered and Regulation No 1111/77, the Council points out that it seems from the application lodged by the same applicant in the action for liability in Case 153/77 that the cause of the alleged damage suffered is to be found
Furthermore, it now appears from the figures submitted by the applicant in Case 124/77 in Annex I to its reply in that case (in particular from the document dated
Be that as it may, it is the Council's opinion that the present claims for damages should be
With more specific reference to Scholten's application, the Council bases its new argument of inadmissibility on Article 42 (2) of the Rules of Procedure. The arguments put forward by this company after the lodging of the Council's defences in the present cases constitute a fresh issue within the meaning of the said article.
Before replying to a number of remarks made by the applicants concerning the Council's alleged serious breach of such a superior rule of law, the Council submits
The Council observes that it is clear that isoglucose is not fully interchangeable with sugar and the share of the market occupied by household consumption cannot be supplied by isoglucose. On the other hand, the scope for substitution in all industrial uses of sugar is extensive. This leads on to the problem of liquid sugar. There are, however, two types of liquid sugar, one marketed in the liquid state and the other which, after delivery to the processor in the solid state, is added by the latter to an aqueous solution for use (certain manufacturers prepare their liquid sugar themselves using solid sugar).
It is contended that the expression
The Council finds no quarrel with the applicant's assertion that there are no acquired rights to the continued existence of regulations. However it points out that, in the context of regulations clearly laying down the conditions which traders are to enjoy during a given period, such traders enjoy, if not
The Council defends the wisdom of its choice of certain objectives in that article in preference to others, against various criticisms made by the applicants.
The Council challenges the argument common to the replies that the levy on A + B sugar amounts to
The applicants will no doubt maintain that the relationship established by Regulation No 1110/77 represents a
The Council considers that there is no justification for the complaint that the levy on isoglucose as compared with the levy on sugar is
The Council argues
Here the situation is quite different. Regulation No 1111/77 starts out from a system legitimately established for sugar and links any expansion of isoglucose production to the difficulties which such development will provoke in the sugar system, from which, moreover, isoglucose benefits.
In its
The Commission maintains its position that isoglucose can be substituted for sugar in the majority of industrial uses of sugar (including crystal sugar) and that the potential market in the long term might amount to as much as 30 % of total Community sugar consumption. In support of that contention, the Commission annexes to its rejoinder an excerpt from the study by Mr Ehle:
The Commission confirms that at the time it submitted its proposal it did not have and still does not have figures on the actual and comparative production costs of isoglucose and liquid sugar. The figures produced by the applicant in Case 124/77 are merely estimates (of which some are particularly open to discussion) since it appears that its plant has not yet come on stream.
The Commission observes that the applicant in Case 143/77 criticizes the Commission for minimizing the importance of isoglucose for Community maize growers, but does not query the present figures produced by the Commission regarding Community supplies of maize. Moreover, shortages in production of maize and surpluses in production of sugar beet within the Community should be weighed against each other.
The Commission persists in all the arguments
On the
Concerning Case 116/77, the Commission recalls that the production of isoglucose is only one of a number of activities of the starch industry, which has many outlets for its numerous products; on the other side there is the sugar industry which is much more specialized in both its production and its outlets. An objective comparison therefore must be made at the level of the economic activities and not, in the abstract, at the level of
In order to refute the applicant's assertion that sugar undertakings producing B and C sugar only constitute a minute minority in comparison with the body of sugar producers, the Commission produces annexed to its rejoinder a statistical table on the number of undertakings producing B and C sugar up to the marketing year 1977/78. It may be seen from the table that, leaving aside the first year, 1968/69, of application of the common organization, the number of undertakings producing B sugar varies between 76 % and 90 % of the total number of sugar undertakings, while between 5 % and 44 % of the undertakings produced C sugar. These figures show that, contrary to the applicant's argument, the comparison made by the Commission with a sugar undertaking producing the three kinds of sugar has a firm economic basis. The objections put forward by the applicant (in the supplement to its reply) to the calculation carried out by the Commission only go to show that the applicant does not wish to be compared with a sugar-producing competitor placed in a similar situation, that is to say recently arrived on the market and supporting the maximum burden of the production levy.
The Commission points out that the applicant in Case 124/77 maintains that if the aim of the levy is to require isoglucose to pay its share of the costs of disposing of surplus sugar the burden imposed on isoglucose should be proportionate to its share of the total market. The applicant calculates this proportion as 3 %. Applying the applicant's own method and taking the applicant's figures for the production of isoglucose, the Commission calculates that the present share borne by isoglucose is only
In reply to this question the Council provides extracts from the three documents concerning isoglucose in the Commission's proposals of February 1977 (Commission proposals of
In addition the Council submits to the Court a document dated
At the end of 1977 the isoglucose production capacity amounted to
Plans were being studied with a view to attaining a capacity of approximately
The extent to which isoglucose might possibly be substituted for sugar (potential use) amounted to
During the discussions in the Council the question arose whether this complete parallelism which might result, in particular, in a maximum rate of levy of 30 % of the intervention price of sugar should not be tempered during a certain transitional period. It was in this context that the Council finally accepted a maximum amount of five units of account for the levy on isoglucose, this amount representing the economic advantage gained by this product from a market price for sugar higher than it would be without the limitation on production deriving from the quota system.
The Commission intended that the one year transitional period should be extended in accordance with the Commission's proposals to the Council for 1978/79, providing during this period the same figure of five units of account for the isoglucose levy.
Did the Council and the Commission at any time, whilst the provisions now in dispute were being drafted, examine and take into consideration the bio-chemical and hygienic properties of isoglucose as compared with traditional sugars manufactured from beet and cane?
The Council states that a comparative examination, such as this question refers to, was not made by the Council at the time of the discussions leading to the adoption of Regulation No 1111/77. The Council's Agent also wonders whether what was at stake here might have been not so much a problem of market organization as a question of harmonization of legislation and possibly a matter of public health.
The Commission states that it did not take into consideration the bio-chemical and hygienic properties of isoglucose as compared with traditional sugars manufactured from beet and cane whilst the provisions now in dispute were being drafted. The Commission acted on the assumption, based on the information in its possession at the time, that isoglucose had, from the economic and commercial point of view, characteristics comparable to those of traditional liquid sugar. By way of illustration, the Commission submits in an annex data provided by the producers of isoglucose themselves which confirm this assumption.
Can the Council supply the Court with other examples taken from the agriculture sector of an obligation (pecuniary or otherwise) imposed on the producers or manufacturers of a product coming under one sector of the common agricultural policy to assist producers or manufacturers of a product coming under another sector?
The Council's Agent rejects the idea that Regulation No 1111/77 was designed to
The Council's Agent makes the point that the agricultural systems of the Member States may be integrated by levying taxes on traders in certain products in one or all Member States for the benefit of traders in other products.
In this connexion the third question put by the Court concerns an extremely complex problem relating to the arrangements to be applied to
The Council's Agent states that it is possible to provide the Court with examples where the interdependence of a certain product with products covered by a sector of the agricultural policy has made it necessary for the Community authorities to adopt measures to maintain or re-establish a balance between products falling within this agricultural sector and similar products. Thus, the Community authorities imposed constraints on non-agricultural products, that is to say products not listed in Annex II but which in common parlance are considered to be of agricultural origin, constraints which were necessary for the smooth functioning of the common organization in question:
Conversely it is also possible to mention another method tending towards the same goal, by which an advantage is granted to the agricultural product so that a balance may be re-established with a similar product. In order to guarantee a balance between agricultural products (starch from cereals, potato starch etc.) and interchangeable products from the industrial sector, the Council (Regulation No 1132/74) introduced a production refund for the former. The Court considered this to be a legitimate mechanism (end of paragraph 7 and paragraphs 9 and 12 of the Decision in Case 2/77
As a third point mention might be made of the example of the case where supply difficulties in an agricultural sector led the Community authorities to tax not only the export of the agricultural product, but also certain goods resulting from the processing of the product, provided that the agricultural product in short supply made up a certain percentage of those goods. Example: Council Regulation (EEC) No 3185/74 of
In conclusion, the Council's Agent reiterates that the
The comparative investigation into the production costs of isoglucose on the one hand and of sugar, liquid and invert sugar on the other, referred to on page 27 (French version) of the Commission's observations in Case 103/77 is the same as that referred to at page 27 (French version) of the Commission's defence in Case 124/77.
This investigation has been entrusted by the Commission to a specialist private firm, Klynveld, Turquands, DTG & Co. (KTD). The two industries in question have accepted this firm.
Originally the Commission intended, so that it should be representative of the Community as a whole, that this investigation should be carried out in three Member States (Germany, Belgium and the United Kingdom) where there was production of isoglucose, sugar and liquid sugar. However, the
By agreement with the Commission and the two industries KTD planned to carry out the first part of tits investigation at Amylum, the report on which was completed on
The investigation into the production costs of isoglucose referred to in the reply in Case 116/77 is an analysis of accounts carried out by the Directorate-General for Industrial Affairs at Amylum (see Annex III). The Commission has not taken a position on the results of this investigation. As it emerges from the answers to the first and third requests, the Commission thought it appropriate to have a comparative investigation carried out.
The Commission provides as Annex IV the information requested by the Court. The Commission mentions that this information has been acquired under the provisions of Regulation (EEC) No 1087/69 (
On page 26 of its defence in Case 116/77 the Commission gave an example to show that the charge imposed on an undertaking manufacturing isoglucose is equivalent to the one imposed, by way of the production levy, on a modern sugar undertaking manufacturing A, B and C sugar.
The Commission is requested to repeat this calculation for the last two sugar-marketing years taking as a basis the average production of all the modern sugar untertakings which have exhausted their B Quota and produced appreciable quantities of C sugar and taking into account the fact that the price allowed for beet-growers in respect of B and C sugar is less than that paid to them in respect of A sugar.
At page 26 of the Commission's defence in Case 116/77 the Commission put forward a calculation, carried out on the basis of the prices and levy for the 1977/78 marketing season but on the hypothesis of a production for the firm in question of the same order as that obtained during the 1976/77 sugar-marketing season since its actual production for 1977/78 was not yet known at the moment of the calculation (November 1977). In the light of the Court's question, the Commission now thinks it useful to submit for this firm the actual figures for the two most recent marketing seasons — see Annex I. These figures show that the position of the particular firm has not improved in spite of its increased quota.
Regarding the other firms for which the Court has asked the Commission to do the calculation again, the Commission thinks it necessary to emphasize that an analysis of their average production for the two most recent marketing seasons does not give a correct impression of their situation. In fact the production of C sugar in most Member States has been comparatively small, often non-existent, because of the drought which prevailed during the 1976/77 marketing season and which seriously affected yields. The average Community yield was 15 to 20 % lower than that for a normal harvest.
Finally the Commission indicates to the Court that it does not know the price paid by sugar-manufacturers to producers for beet intended for C sugar since this does not derive from Community rules but is a matter for agreement between the parties. As to the price actually paid for beet intended for B sugar the Commission knows that it is often higher than the minimum price fixed by the Community and that in certain cases the same price has been paid for all this beet as for beet intended for A sugar. For these reasons the Commission is only able to give the Court the information requested for each individual firm (15 in all) in the form of the calculation applied at page 26 of its defence in Case 116/77. These firms are distributed amongst four Member States.
At the hearing on
The Advocate General delivered his opinion at the hearing on
By letter of
In its judgment of
On the same grounds the Court also refused to accede to a request from the Commission, contained in a letter dated
In its judgment of
By letter of
Following that invitation supplementary observations were submitted by the applicants. In reply the Council and the Commission submitted supplementary written observations.
Koninklijke Scholten-Honig N. V., the applicant in Case 143/77, asked that certain data contained in the evaluation of its losses annexed to its supplementary observations should be treated as confidential and as a result that case was, by order of the Court of
The Court, after asking Tunnel Refineries Ltd. to supply supplementary information as regards the evaluation of its losses (see under VIII below) and on hearing the report of the Judge-Rapporteur and the views of the Advocate General, decided to re-open the oral procedure, limited to the question whether the Community had in principle any non-contractual liability, having regard also to the behaviour of the applicants, as regards one or more heads of the claims for damages put forward by the applicants, any question concerning the proof and detailed calculation of the quantum of any damage which might be established being if necessary deferred until a later stage in the procedure.
The applicant formally claims that the Court should:
Rule that the Community is liable in view of the entry into force of Articles 8 and 9 of Council Regulation No 1111/77 and of Commission Regulation No 1468/77;
Award the applicant, as compensation for the damage suffered by it at the date of lodging the claim the sum of BF
Reserve the applicant's right to claim full reparation for any damage which it may suffer in the event of its being obliged to close its isoglucose factory if the defendant institutions omit to draw the consequences of the judgment of the Court of
Order the defendants to pay the costs.
The
The
Whilst restricting itself to giving details of the amount of the damage suffered by it until the date of its statement arising out of the entry into force of Council Regulation No 1111/77, the applicant nevertheless states that as long as the defendant institutions have not announced their decision with regard to the consequences to be drawn from the judgment of
For the present, it has been possible to state the damage suffered arising from the entry into force of Regulation No 1111/7 as follows on the basis of the data contained in the note annexed to the statement:
The act complained of is Regulation No 1111/77. It is an act of a legislative nature involving choices of economic policy which, according to the settled case-law of the Court, does not make the Community liable, having regard to the provisions of the second paragraph of Article 215 of the Treaty, unless a sufficiently serious breach of a superior rule of law for the protection of the individual has occurred (cf. for example Case
The applicant maintains that it is entitled to rely upon the breach of such a rule of law, namely the fundamental principle of non-discrimination set out in Article 40 (3) of the Treaty, for failure to observe which the Court in its judgment of
However, even in that event it is still necessary to state that the Council has
Whilst not considering such a restrictive interpretation as justified, the applicant declares itself ready to show that it has in fact suffered, as a result of the disputed provisions of Council Regulation No 1111/77,
The applicant points out in particular that, contrary to the situation of the applicants in the
According to the applicant it is clear that the cause of the damage is the direct consequence of the imposition of the isoglucose production levy laid down in Articles 8 and 9 of Regulation No 1111/77. To establish this point it is sufficient to note that as from November 1978, that is to say a short time after the effect of the abolition of the charge was felt, the applicant's business profits began to increase.
It should also be noted that the applicant took all possible steps to reduce the damage as far as possible. Thus it did everything possible to maintain its level of production, compensating for the reduction in sales of isoglucose by alternative sales even though frequently less profitable. The amount claimed by the applicant, namely BF
On this subject the applicant attaches to its observations a note with the tables annexed.
By way of introduction it states in particular that during the period from July 1977 to October 1978 inclusive the levy on isoglucose made it necessary to reduce sales of that product. In fact, owing to the production levy the direct profit margin on isoglucose had become lower than that on its marginal sales of starch and glucose. The applicant accordingly attempted to limit its loss as far as possible by selling products other than isoglucose.
However, it was not possible to find outlets for the alternative products in the early months. In these circumstances the reduction in isoglucose production brought about a reduction in milling (normal milling being
Not only could the applicant no longer accept new customers for isoglucose, but it had become imperative, so as to reduce its losses, to cut back the number of existing customers in proportion as outlets for alternative sales were found. It was necessary to make a selection, enforced by reasons of profitability, amongst those customers: deliveries for which the transport costs were the highest were eliminated. A zone of 350 km around the Aalst factory was established. All the customers outside that zone were abandoned. In addition, canvassing was completely stopped.
As soon as the judgment was delivered, canvassing was resumed and sales immediately increased steeply. In the applicant's view the present situation makes it appear likely that scarcely four months after the judgment maximum capacity will be reached.
Even after the applicant had succeeded in finding alternative outlets it continued to suffer a loss in view of the fact that the sales of alternative products, whilst being more profitable than sales of isoglucose subject to the levy would have been, did not make it possible to realize the same margin as would have been realized by sales of isoglucose during the same period without the levy. The result was a loss equivalent to the difference between the margin which would have been obtained on the isoglucose not sold and the margin on the sale of the alternative products.
As regards details of the calculation of the losses due to the replacement of sales of isoglucose by sales of alternative products and the reduction in milling during the first three months, the applicant puts forward in particular the following considerations.
The applicant states that the loss suffered by reason of the sale of alternative products was calculated as follows. For each month of the period in question (July 1977 to October 1978) the difference between the sales prices ex factory and the direct cost of the alternative products was determined; this margin was compared with that of isoglucose. The comparative margin of unsold isoglucose is based on the average monthly margin for isoglucose sold during the same period.
The direct cost is the sum of all the expenses which are directly proportional to the number of units manufactured. It is the total of the amounts paid for the raw material (maize), the ingredients, packing and energy. The following are not included in the direct cost: wages, costs of upkeep and repairs, selling costs, amounts written off and any general expenses.
The direct cost of isoglucose is the direct cost calculated by Klynveld, Turquands, DTG & Co. at the request of the Commission according to the report of
The applicant supplies explanatory notes on the tables of figures annexed in relation to the following matters:
Table 1: Monthly direct cost of isoglucose calculated on the basis of the Klynveld Turquands DTG report.
Table 2: Selling prices of isoglucose and margin.
Table 3: Selling price and direct margin of alternative products.
Table 4: Difference in margin between alternative products and isoglucose.
Table 5: List of alternative sales.
Table 6: Sales potential abandoned.
On the basis of the data contained in those tables, the applicant claims that during the period from July 1977 to October 1978 inclusive
The applicant had to abandon during that period
The difference between the margin on isoglucose not sold and the margin obtained on the alternative products sold is BF
The total loss due to alternative sales which were less productive is BF
The loss arising from reduction in grinding following the lesser production of isoglucose is calculated by comparison with the grinding effected during the period in question and normal grinding (
The applicant's average grinding for the 12-month period preceding the levy was
The loss suffered is calculated by the product of the tonnage not ground, multiplied by the maize/isoglucose conversion factor, multiplied by the margin not realized set out in Table 2.
The grinding loss took place in the months of August to October 1977.
The applicant gives a detailed calculation of the following total losses due to reduction in grinding:
In the introduction to its observations on this matter the
As regards the
In addition it is necessary, according to the Court's settled case-law (most recently the judgment in
The Commission acknowledges that the rule of law which led the Court to rule that Regulation No 1111/77 was invalid — namely
The Commission denies, however, that a
According to the Commission the requirements on which this situation is based in the law of the Member States also apply at Community level. The Court has taken express account of this by requiring that the breach be serious, which, in the
If the breach of the principle of equality established in the present case by the Court is to be the cause of the alleged damage, it must satisfy two requirements: one concerning the nature of the cause and the other the nature of the damage arising from it.
As regards the applicant's argument based on the paragraphs of the judgment of
First it claims that in that judgment the Court did not express its views on the existence of a serious breach of a superior rule of law but confined itself to establishing the objective invalidity of the regulation. Moreover, as may be seen from the
Moreover, as the Court stated in the
The fact that the Community has the power to impose a levy in this case and that by putting into effect such a levy it has remained within its powers can no longer be contested after the judgment of
Without prejudice to the arguments which it puts forward later with regard to the damage and the causal connexion, the Commission remarks that in order to assess the seriousness of the damage suffered by the applicants
The Commission disputes the direct and abnormal nature of the details of the damage put forward by the applicant
As regards the
Secondly the other principal factor in the damage claimed, namely the
As regards the
Secondly it appears that the economic risks inherent in the production of isoglucose are much higher than the applicant claims. In fact, at the time at which the applicant undertook the construction of its production unit for
The
The damages which it claims have been the subject of an independent audit, the certificates in respect of which is set out in Annex I to its observations. Its claim is made on the basis that no further unlawful measures will be taken in respect of isoglucose. Subject to that qualification, the applicant would accept this claim, which has been updated to November and December 1978, plus continuing interest, as representing its full entitlement in damages.
The applicant refers to the major investments undertaken by it with a view to permitting it to produce isoglucose and states that the introduction of the levy in July 1977 drastically affected its plans. As Annex II to its observations it sets out a chronological summary of the main events relating to its investments and to the levy, together with supporting documents.
The applicant sets out under the following headings the losses directly attributable to the isoglucose levy.
The introduction in July 1977 of the levy at the rate of £
The applicant states that it was obliged to find alternative outlets for considerable quantities of starch which would have been used for the production of isoglucose. The applicant's concern was to optimize its return on the additional starch plant; however, the only immediate use which could be found for the additional starch was to produce dry starch. This involved reentering a difficult and very competitive market, but although the return was likely to be low, it would have been higher than the return on isoglucose when account was taken of the levy on the product.
By drying starch rather than producing isoglucose, on the assumption of a nil levy but without of course taking account of the production refund which had been abolished from July 1977, the applicant lost profits which have been evaluated at £
As a result of being compelled to reenter the dry starch market, the applicant inevitably encountered initial difficulties in selling dry starch at its higher production levels, with the result that warehouse storage and handling costs were incurred. Tunnel is confident that it can sell its stocks in time, but has incurred continuing storage and handling costs. These costs have been evaluated at £
Since isoglucose is a product dependent upon advanced technology, in particular enzyme technology, its cost is naturally dependent upon full utilization of the plant.
As a result of the timing of the announcement of the isoglucose levy, it was necessary to reduce the production of isoglucose without its being possible to modify the plant satisfactorily to deal with the lower throughput. The plant was designed to handle 700 dry substance tonnes (
Two main sources of loss were identified: one was the waste of steam, which had to be put in at the level needed for full production; the other was the low productivity of the expensive enzyme process, because the enzyme conversion columns, in which the starch undergoes the process of conversion to fructose, could be only partly filled. These losses were evaluated at £
The applicant remarks that it had been decided in September 1976 to install a dextrose spinner to make better use of its existing equipment; the starch raw material for dextrose was expected to come from a reduction in traditional glucose production. In June 1977, however, after the announcement of the levy, it was proposed that the level of glucose production should be maintained and that part of the starch originally intended for isoglucose should be used as raw material for dextrose. In November 1977, it was decided to re-organize the factory's evaporation facilities; although other factors were also present, one of the main reasons for this was that at the expected reduced levels of isoglucose throughput it would otherwise be impossible to maintain the quality of isoglucose production at the standards agreed with customers. In October 1978 two further capital projects were approved, for further dextrose production and increased refinery conversion. Further details of these projects, together with supporting documents, are set out in Annex II.
The projects mentioned in paragraph 26 of the observations would have been unnecessary had there been no levy on isoglucose. The losses under that heading have been evaluated at £
The applicant states that it had to fund its losses under headings (a) to (e) from its normal sources of finance, principally bank loans and overdrafts. Based upon its actual borrowing record during 1978, a reasonable estimate for such interest actually paid in respect of the above losses is 12 % per annum. The interest charges have been calculated down to
The applicant's decision to restrict production was obviously unpopular with customers. It consequently suffered a major loss of goodwill which it is unable to quantify at this stage.
The applicant also considers that it has lost the opportunity to negotiate quantity discounts and rebates on some materials and services associated with isoglucose. Again, at this stage, it is unable to quantify this loss.
The applicant estimates that its losses up to
plus continuing interest from
The applicant submits that the losses suffered by it were a direct consequence of the unlawful actions of the Community. Furthermore, the applicant, which could not have been expected to foresee any unlawful Community action, and on whose part there were no contributory acts, acted throughout with proper commercial prudence and, when the levy was imposed, took every reasonable step to mitigate its losses.
Since the judgment of
The applicant refers in particular to the requirement laid down in paragraph 6 of the
On the basis of the judgment of
In the alternative, if the Court should not consider that the manifest character of the infringement is already established by its findings on discrimination, the applicant respectfully invites the Court to consider the further violation of other rules of law for the protection of the individual as alleged in its application.
As regards the effects of the infringement, the applicant refers essentially to the same factors as those advanced by the applicant
In conclusion the applicant submits that its claim for damages falls squarely within the conditions laid down by the Court's case-law and fully satisfies all the requirements for establishing the liability of the Community.
By way of introduction, the
The Commission then proceeds to an examination of the matter under the following headings:
The observations submitted by the Commission with regard to the Community's liability are in essentials similar to those set out under the heading of
According to the Commission, all the
The Commission submits, on the basis of the applicant's own account, that the strategy adopted aggravated the losses and should rather be regarded as a
That submission is supported by the following considerations. First, the
Secondly, shortly after the applicant started production of isoglucose, the Commission made the proposal to the Council of Ministers to freeze the isoglucose levy at the level of 50 % adopted theretofore (
The Commission further claims that the root cause of the applicant's difficulties in obtaining a reasonable return from its investment in isoglucose was the surplus of sugar prevailing on the Community and world markets at the time when its plant came on stream (end of 1977), whilst the applicant's basic investment decision was made in October 1974, when world prices were extremely high and were bringing about a steep increase in Community prices. In this context it is significant that already by October 1975 the applicant was having doubts about the wisdom of its investment in isoglucose and had decided to reduce the planned capacity by half (from 200 tonnes to 100 tonnes per day, dry matter).
Finally the Commission submits that another
In its observations on the losses the Commission emphasizes the necessity for additional information in order to appreciate properly various aspects of the evaluation of the losses claimed by the applicant in Annex III to its observations (in particular under the headings
The Court has asked the applicant to supply such information (see under IV below).
As regards the losses under the heading
Finally the Commission states that as a result of the judgment in Cases 103 and 145/77, collection of the isoglucose levy has been suspended from
In
The
First the Council remarks that there are two possible methods of production for isoglucose, either by expanding the maize-grinding capacity of a conventional starch plant already built and adding on the specific plant required for the production of isoglucose, or else by creating a production unit specifically and solely equipped for isoglucose production.
The applicants
By doing so,
The damage which the applicant
As regards the judgment of
On the basis of the Court's judgment and for the sake of argument the Council proceeds to make a rough calculation of a non-discriminatory levy to be borne by isoglucose producers which would compare economically with that borne by sugar producers.
In this respect the Council begins its comparison with isoglucose producers by taking as a model a sugar producer who has used up both his A and B quota, the Court having, in paragraph 74 et seq. of the above judgment, accepted the comparison between the charge levied upon modern sugar works which also produce C sugar and that levied upon isoglucose producers. For the purposes of its comparison the Council accepts that the Court criticized the fact that, when the officers of the Commission calculated the average charge for these sugar undertakings running from
Since
If the Court's reasoning is followed, it is that latter charge which might be levied per 100 kg of isoglucose for the 1977/78 sugar year without discriminating against isoglucose producers by comparison with sugar producers in similar circumstances.
However, the Council emphasizes that once again it should be remembered, in order to appreciate the economic risks inherent in present-day sugar production with a structural surplus of sugar, that it is not the aim of quotas to create structural surpluses. In this connexion Article 27 (2) of Regulation No 3330/74 of the Council lays down that the production levy shall be calculated at a flat rate in proportion to the total losses incurred by the Community in disposing of the surplus of guaranteed sugar on the world market. On the basis of that principle the maximum levy for the 1977/78 sugar year was
However, that amount was not used by Regulation No 2889/78 for the maximum levy for that year since Article 27 (3) of Regulation No 3330/74 limits the levy at a flat rate of 30 % of the intervention price (in this case
In the present state of affairs it would have been conceivable, according to the Council, to abolish the 30 % ceiling since the charge to which it gave rise is apparently not such as to discourage the production of sugar in excess of the basic quota in regions less suited to sugar-making. On that assumption the levy to be paid by sugar works would have increased as follows:
If the validity of such a
Finally the Council remarks that under the proposal for a regulation amending Regulation No 1111/77, which the Commission sent to the Council on
Referring to the
The Council thinks that the proper interpretation of the
Thus, in the light of these considerations, an assessment should be made of the effect of introducing the five units of account levy on the profitability of the parties' isoglucose production. In this connexion it should be recalled that the applicant
The Council wonders whether the Court makes use, in attributing or rejecting liability of the Community, of a criterion linked to the seriousness not merely of the damages suffered by the plaintiff but also of the breach of the rule of law in question. Such a criterion appears to be implicit in the terms of the 6th paragraph of the
This conclusion is understandable having regard to the difficulties with which the Council and the Commission are faced in the implementation of the common agricultural policy and the complexity both of the interests to be taken into account and the objectives to be attained, bearing in mind the vagaries of the economic situation.
Recalling the complexity of the problem which arose in 1976 with the appearance of isoglucose in considerable quantities on the Community market, the Council feels that the greatest doubts might be entertained concerning the seriousness of the breach which it is supposed to have committed when it adopted the regulations concerned.
Proceeding, like the Commission, to a comparison of the cost price of isoglucose produced by the applicant
The conclusion is therefore that investments in isoglucose were economically unjustifiable and that production of isoglucose cannot be expected to show a return in the foreseeable future. Accordingly introduction of the levy of 5 units of account
It may well be asked why, if Isoglucose was
Finally the Council examines the arguments put forward in particular by the applicant in Case 143/77 that, on the one hand, as long as there was a positive margin between variable unit costs per product and the selling price, production had to continue and, on the other hand, if the effect of the levy of 5 units of account had been to use up that margin it followed that the invested capital would lose all its value.
In the Council's view there are two misconceptions in that argument. First, it is founded on calculations taking into account for determining the margin only variable costs and their relation to selling price, whereas the calculation should be based on all the costs to be borne by the producer, which should be compared with selling price; indeed, the hypothesis developed presupposes that the undertaking is paying the fixed production costs by drawing on another source, which is contrary to sound business management. Secondly, the abovementioned argument postulates that any levy whatever charged on isoglucose, in whatever manner, should be prohibited, whereas the Court has not condemned the principle of such levies.
On the basis of an examination of these two points the Council concludes that with a levy which complied with the equality of treatment of sugar producers, the applicant
As a subsidiary application the Council requests the Court, if it finds that the non-contractual liability of the Community is incurred in principle, to take the arguments expounded above as establishing that there is no causal connexion between the Community's action and the losses alleged by the applicants.
Whilst holding to the arguments set out in the defence and the rejoinder, the Council reserves the right to advance at a later stage — should the Court find that the Community is liable under Article 215 and that there is in fact an unbroken causal connexion between the Community's actions and the alleged damage — any relevant argument regarding the constituent elements of the damage to the parties concerned.
In
By letter of
The only relevant forecast providing detailed figures, before the announcement of the levy, was prepared in May and June 1976 as part of Tunnel's annual budget plan for the year beginning in September 1976. It sets out in Annex A to its answer extracts from the budget plan from which it emerges that the isoglucose plant was to be used at 100 % of its effective capacity from the beginning of production. The extracts also show the relative margins of isoglucose and of dry starch and the expected fall in production of dry starch as isoglucose production increased.
However, it was not possible to start production of isoglucose until the end of 1977, that is to say, after the announcement of the levy. The subsequent forecasts (cf. Annex II to the applicant's statement of observations with regard to damages) were based on the existence of the levy.
The applicant states that the
The increase in that margin from July 1978 was in line with the selling price of sugar. The increase in the margin before that date was due not to an increase in price but to a reduction in costs.
According to the applicant the reason for the decision to process most of the wet starch by producing dry starch was that that was the only immediate use that could be found for the additional quantities of starch, which, but for the levy, would have been used for the production of isoglucose.
The application ceased to import and resell dry starch because its own production of that product meant more starch on a market where there was already a plentiful supply.
The process used for the production of dry starch is quite different from the isoglucose process inasmuch as fixed costs are not a significant item. Accordingly there was no reduction in costs attributable to greater production of dry starch.
The applicant states that in the past it has not considered it necessary to maintain permanent records of the floor space and storage occupied by any specific product. It has not therefore preserved internal records and copies of invoices in sufficient detail to allow it to determine the actual storage costs of starch alone. However, on the basis of his personal knowledge and experience, the applicant's chief storekeeper estimates that during the period from November 1977 to November 1978 storage space was used approximately as follows: starch 65 %, machinery 15 %, process materials 10 % and dextrose 5 %. On the basis of that estimate the share of storage and handling costs borne by starch for the above-mentioned period is £
At the hearing on
The Advocate General delivered his opinion at the hearing on
On those grounds,
THE COURT
hereby:
Kutscher
O'Keeffe
Touffait
Mertens de Wilmars
Mackenzie Stuart
Bosco
Koopmans
Delivered in open court in Luxembourg on
A. Van Houtte
Registrar
H. Kutscher
President