Federation de l'industrie de l'huilerie de la CEE (Fediol) v Commission of the European Communities. (Common Commercial Policy ) [1989] EUECJ C-70/87 (22 June 1989)

Judgment 1 By an application lodged at the Court Registry on 6 March 1987 the EEC Seed Crushers' and Oil Processors' Federation ( hereinafter referred to as "Fediol ") brought an action under the second paragraph of Article 173 of the EEC Treaty, seeking the annulment of the Commission' s ( unpublished ) Decision No 2506 of 22 December 1986, notified to the applicant on 7 January 1987 . By that decision the Commission rejected the applicant' s complaint requesting the Commission to initiate a procedure to examine certain commercial practices of Argentina regarding the export of soya cake to the Community, pursuant to Article 3(5 ) of Council Regulation No 2641/84 of 17 September 1984 on the strengthening of the common commercial policy with regard in particular to protection against illicit commercial practices ( Official Journal 1984, L 252, p . 1 ). 2 Regulation No 2641/84, described as "a new instrument of commercial policy", is designed to enable the Community to deal with illicit commercial practices other than dumping and subsidies . According to Article 2(1 ) of the regulation, "illicit commercial practices" means "any international trade practices attributable to third countries which are incompatible with international law or with the generally accepted rules ". 3 Regulation No 2641/84 lays down the procedure for dealing with commercial practices of that kind . The procedure is initiated by a complaint lodged on behalf of Community producers ( Article 3 ) or at the request of a Member State ( Article 4 ); it consists of two stages . 4 In the first stage the Commission considers ( a ) whether the complaint or request contains sufficient evidence of the existence of the commercial practices complained of, ( b ) whether those practices are illicit, ( c ) whether the complaint or request contains sufficient evidence of consequent injury, or the threat of such injury, to a Community industry, and ( d ) whether it is necessary in the interest of the Community to initiate an examination procedure . If the answer to those questions is affirmative, the Commission initiates the procedure and assembles all the information needed for the examination . 5 In the second stage, when, at the end of the examination procedure, both an illicit commercial practice and the consequent injury to a Community industry have been substantiated, the Commission decides whether action needs to be taken in the interest of the Community . If that is so, it proposes to the Council the adoption of appropriate commercial policy measures, having, where necessary, implemented formal international procedures for consultation or for the settlement of disputes . 6 The contested decision recites that Fediol' s complaint related to two practices on the part of Argentina which the complainant described as "illicit commercial practices", namely : ( i ) a scheme of differential charges on exports of soya products ( soya beans, soya oil and soya cake ), whereby the exportation of soya beans - the raw material for the production of soya oil and soya cake - was subject to higher rates of duty than were charged on the exportation of soya oil and cake; the rates were, moreover, calculated on the basis of artificial reference prices, laid down by the Argentine authorities without regard to world market prices; and ( ii ) quantitative restrictions on the exportation of soya beans, inter alia in the form of export registrations and sporadic suspension of exports by administrative directives . 7 According to Fediol the abovementioned practices caused serious damage to the European oil-processing industry, because they have the effect of : ( i ) discouraging the exportation of soya beans, which increases the supply of such products on the Argentine market and thereby lowers their selling price to the Argentine oil-processing industry, and hence ( ii ) guaranteeing the Argentine oil-processing industry large crushing margins for the processing of beans into oil and soya cake, since it can buy the raw material - soya beans - at a price below the world market price; that benefit enabled it not only to offset the low rate of duty levied on exports of oil and cake but also to sell those two products at prices far below their normal value and the prices usually charged by the European oil-processing industry . 8 In its complaint Fediol supports its claim with the argument that the abovementioned practices are contrary to Articles III, XI and XXIII of the General Agreement on Tariffs and Trade ( hereinafter referred to as "GATT "), either individually or jointly . In its observations submitted to the Commission on 9 May 1986, Fediol maintained that the practices were also contrary to Articles XX and XXXVI of GATT . 9 By the contested decision the Commission rejected the complaint, both ( a ) as regards the charging of differential rates of duty ( the existence of which it does not deny ) on the grounds that it does not run counter to any of the rules of international law upon which Fediol had relied in its complaint, and ( b ) as regards the existence of quantitative restrictions on the exportation of soya beans, on the grounds that that part of the complaint was not supported by any evidence whatever . 10 During the procedure before the Court the applicant has not put forward any submission to contest the Commission' s contention that there was no proof of the existence of quantitative restrictions on the exportation of soya beans . The substantive challenge is therefore concerned solely with the categorization by the contested decision of the charging of differential rates of duty, according to which that is not contrary to the GATT provisions upon which Fediol had relied . 11 In its application to the Court, Fediol claims that the charging of differential rates of duty is contrary to Articles III, XI and XXIII of GATT; it is in Fediol' s view also contrary to Article XX of GATT to which Fediol had referred in the observations which it submitted to the Commission on 9 May 1986, but which the Commission did not consider in the contested decision . 12 Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the course of the procedure and the submissions and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court . Admissibility 13 The Commission contends that the application is inadmissible because none of the submissions relied on are admissible . The Commission maintains that the only submissions which may be made in view of the legal protection conferred on the complainant by Regulation No 2641/84 are those based on disregard of procedural guarantees, manifest infringement of certain provisions of Community law, or a serious misuse of powers on the Commission' s part having the effect of negating the procedural guarantees afforded by the Regulation . 14 According to the Commission the complainant cannot be permitted to make submissions directed against the contents of the Commission' s decisions, because its power to define the interests of the Community in the two procedural phases set out above entails not only the exercise of a broad discretion but also the taking into account of political considerations which are not amenable to review by the Court . The complainant can therefore never rely on submissions concerning the interests of the Community to challenge a definitive decision terminating the procedure . Consequently, the complainant is also precluded from contesting the other assessments made by the Commission during the procedure . 15 In that connection it should be pointed out that the decision at issue contains no assessment regarding the Community' s interest in the initiation of an examination procedure or even regarding the injury or threat of injury to the Community industry concerned arising from the practice in question . The contested decision confines itself to the finding that the charging of differential rates of duty is not contrary to the GATT provisions . 16 Since that finding was made prior to, and independently of, the assessment of the Community' s interests, it requires separate consideration . The question whether or not the Commission' s assessment of the Community interest is amenable to review by the Court is not therefore at issue . 17 That submission of inadmissibility must therefore be rejected . 18 The Commission further maintains that when, as in this case, its decision deals with the interpretation of GATT provisions, the complainant cannot be permitted to put forward submissions calling that interpretation in question, because the interpretation which the Commission, pursuant to Regulation No 2641/84, places on the term "illicit commercial practice" and on the rules of international law, in particular those of GATT, is subject to review by the Court only in so far as the disregard or misapplication of those rules amounts to an infringement of the provisions of Community law which vest rights in individuals, directly and specifically; however, the GATT rules themselves are not sufficiently precise to give rise to such rights on the part of individuals . 19 It should be recalled that the Court has certainly held, on several occasions, that various GATT provisions were not capable of conferring on citizens of the Community rights which they can invoke before the courts ( judgments of 12 December 1972 in Joined Cases 21 to 24/72 International Fruit Company (( 1972 )) ECR 1219; 24 October 1973 in Case 9/73 Schlueter (( 1973 )) ECR 1135; 16 March 1983 in Case 266/81 SIOT (( 1983 )) ECR 731; and 16 March 1983 in Joined Cases 267 to 269/81 SPI and SAMI (( 1983 )) ECR 801 ). Nevertheless, it cannot be inferred from those judgments that citizens may not, in proceedings before the Court, rely on the provisions of GATT in order to obtain a ruling on whether conduct criticized in a complaint lodged under Article 3 of Regulation No 2641/84 constitutes an illicit commercial practice within the meaning of that regulation . The GATT provisions form part of the rules of international law to which Article 2(1 ) of that regulation refers, as is borne out by the second and fourth recitals in its preamble, read together . 20 It is also appropriate to note that the Court did indeed hold in the abovementioned judgments of 12 December 1972 International Fruit Company, 24 October 1973 Schlueter and 16 March 1983 SPI and SAMI, that a particular feature of GATT is the broad flexibility of its provisions, especially those concerning deviations from general rules, measures which may be taken in cases of exceptional difficulty, and the settling of differences between the contracting parties . That view does not, however, prevent the Court from interpreting and applying the rules of GATT with reference to a given case, in order to establish whether certain specific commercial practices should be considered incompatible with those rules . The GATT provisions have an independent meaning which, for the purposes of their application in specific cases, is to be determined by way of interpretation . 21 Lastly, the fact that Article XXIII of GATT provides a special procedure for the settlement of disputes between contracting parties is not such as to preclude its interpretation by the Court . As the Court held in the judgment of 26 October 1982 in Case 104/81 Kupferberg (( 1982 )) ECR 3641, in the context of the joint committees which are set up by free-trade agreements and given responsibility for the administration and proper implementation of those agreements, the mere fact that the contracting parties have established a special institutional framework for consultations and negotiations inter se in relation to the implementation of the agreement is not in itself sufficient to exclude all judicial application of that agreement . 22 It follows that, since Regulation No 2641/84 entitles the economic agents concerned to rely on the GATT provisions in the complaint which they lodge with the Commission in order to establish the illicit nature of the commercial practices which they consider to have harmed them, those same economic agents are entitled to request the Court to exercise its powers of review over the legality of the Commission' s decision applying those provisions . 23 In the light of the foregoing the objection of inadmissibility raised by the Commission must be rejected . Substance 24 As far as the substantive issues are concerned, the applicant submits that the commercial practices at issue are incompatible with certain provisions of GATT . Article III of GATT 25 The applicant asserts that the charging of differential rates of duty is contrary to Article III of GATT . 26 Article III(1 ) provides as follows : "The contracting parties recognize that internal taxes and other internal charges, and laws, regulations and requirements affecting the internal sale, offering for sale, purchase, transportation, distribution or use of products, and internal quantitative regulations requiring the mixture, processing or use of products in specified amounts or proportions, should not be applied to imported or domestic products so as to afford protection to domestic production ". 27 It should be noted that Article III(1 ) relates only to taxes, other charges and rules which relate to the internal market and have a protective effect . Consequently, since the contested Argentine duties are levied exclusively on exported products, they do not fall within the ambit of that provision . 28 The applicant, however, maintains that Article III of GATT seeks not only to eliminate any discrimination against imported products by means of a system of internal charges but also to prevent the protection of national products through a system of differential export duties - such as the one at issue here - from causing injury to the industry of a third country to which those products are exported . 29 That argument cannot be accepted . The purpose of Article III of GATT is to avoid any discrimination against imported products in favour of domestic ones, in the form of internal charges and rules; it cannot therefore be applied to a case such as the present one, which concerns a system of differential export duties levied solely on certain categories of domestic products . 30 Consequently, the applicant' s submission alleging the infringement of Article III of GATT must be rejected . Article XI of GATT 31 Under Article XI(1 ), "No prohibitions or restrictions other than duties, taxes or other charges, whether made effective through quotas, import or export licences or other measures, shall be instituted or maintained by any contracting party on the importation of any product of the territory of any other contracting party or on the exportation or sale for export of any product destined for the territory of any other contracting party ". 32 According to the applicant some aspects of the system of differential duties, and in particular the fixing of artificial reference prices as a basis for the calculation of the differential rates of duty levied on soya products intended for exportation are distinct in character from the charges excluded from the prohibition set out in Article XI of GATT, and constitute measures having equivalent effect to a quantitative restriction . They are therefore contrary to Article XI which, by referring to "restrictions ... made effective through ... other measures", lays the emphasis on the effects rather than the form of the measures in question . 33 In this connection it should be observed that, as may be seen from its wording, Article XI(1 ) of GATT excludes from its scope any restrictions arising inter alia from taxes or other charges, and this is not denied by the applicant . In the present case, however, the measures in dispute are export duties which, contrary to the applicant' s assertions, do not cease to be such duties by virtue of being calculated artificially . 34 That submission must therefore be rejected . Article XX of GATT 35 Article XX provides that any contracting party may adopt measures derogating from the GATT provisions provided that they do not constitute either a means of arbitrary or unjustifiable discrimination between countries where the same conditions prevail or a disguised restriction on international trade . The permitted derogations include those "( i)involving restrictions on exports of domestic materials necessary to ensure essential quantities of such materials to a domestic processing industry during periods when the domestic price of such materials is held below the world price as part of a governmental stabilization plan, provided that such restrictions shall not operate to increase the exports of or the protection afforded to such domestic industry, and shall not depart from the provisions of this Agreement relating to non-discrimination ". 36 According to the applicant, that provision entails a general prohibition on measures involving export restrictions whose effect is to protect the national industry in question, unless the conditions for derogation are fulfilled . 37 It is sufficient to note in this connection that Article XX(i ) of GATT provides for an exception to the prohibitions arising under the other provisions of GATT; it therefore presupposes a prohibition imposed by some other provision, to which it lays down for an exception . Accordingly, it is not possible to infer from that article a general prohibition existing in its own right . 38 That submission, too, must therefore be rejected . Article XXIII of GATT 39 Article XXIII(1 ) of GATT is worded as follows : "If any contracting party should consider that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired or that the attainment of any objective of the Agreement is being impeded as the result of ( a ) the failure of another contracting party to carry out its obligations under this Agreement, or ( b ) the application by another contracting party of any measure, whether or not it conflicts with the provisions of this Agreement, or ( c ) the existence of any other situation, the contracting party may, with a view to the satisfactory adjustment of the matter, make written representations or proposals to the other contracting party or parties which it considers to be concerned . Any contracting party thus approached shall give sympathetic consideration to the representations or proposals made to it ". 40 Article XXIII(2 ) establishes the procedure to be followed "if no satisfactory adjustment is effected between the contracting parties concerned within a reasonable time, or if the difficulty is of the type described in paragraph 1(c ) of this Article ". 41 The applicant puts forward a series of contentions based on the premise that those provisions prohibit any conduct nullifying or impairing any benefit accruing under GATT or any of its objectives . The applicant claims that, in the present case, a benefit accruing under GATT has been jeopardized, either because the charging of differential duties is contrary to certain obligations arising under GATT ( Article XXIII(1)(a ) ), or because it infringes the legitimate expectation of the Community ( Article XXIII(1)(b ) and ( c ) ). 42 In that connection it is sufficient to note that Article XXIII of GATT does not, in itself, contain any specific substantive rule, contravention of which would establish the existence of an illicit commercial practice . The purpose of Article XXIII is merely to lay down the procedure which a contracting party may use, within the framework of GATT, when a benefit accruing to it under GATT is being nullified or impaired by the conduct of another contracting party, even in cases where the conduct in question does not conflict with the provisions of GATT . 43 Consequently, that submission must be rejected . Costs 44 Under Article 69(2 ) of the Rules of Procedure the unsuccessful party is to be ordered to pay the costs . However, under the first subparagraph of Article 69(3 ), where each party succeeds on some and fails on other heads, the Court may order that the parties bear their own costs in whole or in part . Since the Commission has failed in its submissions contesting the admissibility of the application, the parties must be ordered to bear their own costs . On those grounds, THE COURT hereby : ( 1 ) Dismisses the application; ( 2 ) Orders the parties to bear their own costs . © European Communities, 2001 All rights reserved BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII