Koninklijke ScholteC-Honig NV v Council and Commission of the European Communities. [1979] EUECJ C-143/77 (5 December 1979)

[ Home ] [ Databases ] [ World Law ] [ Multidatabase Search ] [ Help ] [ Feedback ] [ DONATE ] Court of Justice of the European Communities (including Court of First Instance Decisions) You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Koninklijke ScholteC-Honig NV v Council and Commission of the European Communities. [1979] EUECJ C-143/77 (5 December 1979) URL: https://www.bailii.org/eu/cases/EUECJ/1979/C14377.html Cite as: [1979] EUECJ C-143/77 [ New search ] [ Help ] IMPORTANT LEGAL NOTICE - The source of this judgment is the web site of the Court of Justice of the European Communities . The information in this database has been provided free of charge and is subject to a Court of Justice of the European Communities disclaimer and a copyright notice . This electronic version is not authentic and is subject to amendment. 61977J0143 Judgment of the Court of 5 December 1979. Koninklijke Scholten-Honig NV v Council and Commission of the European Communities. Isoglucose - Direct action. Case 143/77. European Court reports 1979 Page 03583 Greek special edition 1979:II Page 00723 NON-CONTRACTUAL LIABILITY - LEGISLATIVE MEASURE INVOLVING CHOICES OF ECONOMIC POLICY - LIABILITY OF COMMUNITY - CONDITIONS - SUFFICIENTLY SERIOUS BREACH OF A SUPERIOR RULE OF LAW FOR THE PROTECTION OF THE INDIVIDUAL - SAFEGUARD OF LEGAL PROTECTION NOT AFFECTED . ( EEC TREATY , SECOND PARAGRAPH OF ART . 215 ) A FINDING THAT A LEGAL SITUATION RESULTING FROM A LEGISLATIVE MEASURE BY THE COMMUNITY INVOLVING CHOICES OF ECONOMIC POLICY IS ILLEGAL IS INSUFFICIENT BY ITSELF TO INVOLVE THE COMMUNITY IN LIABILITY UNDER THE SECOND PARAGRAPH OF ARTICLE 215 OF THE EEC TREATY ; IN ADDITION THE MEASURE MUST BE VITIATED BY A SUFFICIENTLY SERIOUS BREACH OF A SUPERIOR RULE OF LAW FOR THE PROTECTION OF THE INDIVIDUAL . IN THE CONTEXT OF COMMUNITY LEGISLATION IN WHICH ONE OF THE CHIEF FEATURES IS THE EXERCISE OF A WIDE DISCRETION ESSENTIAL IN PARTICULAR FOR THE IMPLEMENTATION OF THE COMMON AGRICULTURAL POLICY , THE LIABILITY OF THE COMMUNITY CAN ARISE ONLY EXCEPTIONALLY , THAT IS TO SAY , IN CASES IN WHICH THE INSTITUTION CONCERNED HAS MANIFESTLY AND GRAVELY DISREGARDED THE LIMITS ON THE EXERCISE OF ITS POWERS . GRAVE DISREGARD IS TO BE UNDERSTOOD AS MEANING CONDUCT VERGING ON THE ARBITRARY . THIS CONCEPT IS CONFIRMED IN PARTICULAR BY THE FACT THAT , EVEN THOUGH AN ACTION FOR DAMAGES UNDER ARTICLE 178 AND THE SECOND PARAGRAPH OF ARTICLE 215 OF THE TREATY CONSTITUTES AN INDEPENDENT ACTION , IT MUST NEVERTHELESS BE ASSESSED HAVING REGARD TO THE WHOLE OF THE SYSTEM OF LEGAL PROTECTION OF INDIVIDUALS SET UP BY THE TREATY . IF AN INDIVIDUAL TAKES THE VIEW THAT HE IS INJURED BY A COMMUNITY LEGISLATIVE MEASURE WHICH HE REGARDS AS ILLEGAL HE HAS THE OPPORTUNITY , WHEN THE IMPLEMENTATION OF THE MEASURE IS ENTRUSTED TO NATIONAL AUTHORITIES , TO CONTEST THE VALIDITY OF THE MEASURE , AT THE TIME OF ITS IMPLEMENTATION , BEFORE A NATIONAL COURT IN AN ACTION AGAINST THE NATIONAL AUTHORITY . SUCH A COURT MAY , OR EVEN MUST , IN PURSUANCE OF ARTICLE 177 OF THE TREATY , REFER TO THE COURT OF JUSTICE A QUESTION ON THE VALIDITY OF THE COMMUNITY MEASURE IN QUESTION . THE EXISTENCE OF SUCH AN ACTION IS BY ITSELF OF SUCH A NATURE AS TO ENSURE THE EFFICIENT PROTECTION OF THE INDIVIDUALS CONCERNED . IN CASE 143/77 , KONINKLIJKE SCHOLTEN-HONIG N. V ., AMSTERDAM , ALSO ACTING ON BEHALF OF THE SUBSIDIARIES BELONGING TO ITS GROUP , IN PARTICULAR ROYAL SCHOLTEN-HONIG ( HOLDINGS ) LIMITED , ASSISTED AND REPRESENTED BY P . C . VAN DEN HOEK AND D . J . GIJLSTRA , BOTH OF THE AMSTERDAM BAR , WITH AN ADDRESS FOR SERVICE IN LUXEMBOURG AT THE CHAMBERS OF J . C . WOLTER , 2 RUE GOETHE , APPLICANTS , V COUNCIL OF THE EUROPEAN COMMUNITIES , REPRESENTED BY DANIEL VIGNES , DIRECTOR OF ITS LEGAL DEPARTMENT , ACTING AS AGENT , ASSISTED BY A . BRAUTIGAM , A MEMBER OF THE LEGAL 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 BY ITS LEGAL ADVISER JACQUES BOURGEOIS , ACTING AS AGENT , ASSISTED BY JACQUES DELMOLY , A MEMBER OF ITS LEGAL DEPARTEMENT , 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 , DEFENDANTS , APPLICATION FOR DAMAGES UNDER ARTICLE 178 AND THE SECOND PARAGRAPH OF ARTICLE 215 OF THE TREATY , 1 THE APPLICANT IN THIS CASE IS CLAIMING THAT THE EUROPEAN ECONOMIC COMMUNITY , REPRESENTED BY THE COUNCIL AND THE COMMISSION , SHOULD BE ORDERED TO PAY IT COMPENSATION UNDER THE SECOND PARAGRAPH OF ARTICLE 215 OF THE EEC TREATY FOR THE DAMAGE WHICH IT CLAIMS TO HAVE SUFFERED AS A RESULT OF THE IMPOSITION OF A PRODUCTION LEVY ON ISOGLUCOSE IN PURSUANCE OF COUNCIL REGULATION NO 1111/77 OF 17 MAY 1977 LAYING DOWN COMMON PROVISIONS FOR ISOGLUCOSE ( OFFICIAL JOURNAL L 134 , P . 4 ). 2 IT MAY BE RECALLED THAT THE FOLLOWING REASONS WERE GIVEN IN THE SEVENTH RECITAL IN THE PREAMBLE TO THAT REGULATION FOR THE SETTING UP OF A PRODUCTION LEVY SYSTEM FOR ISOGLUCOSE : ' ' . . . BEING A SUBSTITUTE PRODUCT IN DIRECT COMPETITION WITH LIQUID SUGAR , WHICH , LIKE ALL BEET OR CANE SUGAR , IS SUBJECT TO STRINGENT PRODUCTION CONSTRAINTS , ISOGLUCOSE THEREFORE ENJOYS AN ECONOMIC ADVANTAGE , AND SINCE THE COMMUNITY HAS A SUGAR SURPLUS , IT IS NECESSARY TO EXPORT CORRESPONDING QUANTITIES OF SUGAR TO THIRD COUNTRIES ; . . . THERE SHOULD , THEREFORE , BE PROVISION FOR A SUITABLE PRODUCTION LEVY ON ISOGLUCOSE TO CONTRIBUTE TO EXPORT COSTS ' ' . 3 ACCORDING TO THE NINTH RECITAL , THE AFORESAID LEVY SYSTEM IS COMPLEMENTARY TO THAT ESTABLISHED FOR SUGAR BY COUNCIL REGULATION NO 3330/74 OF 19 DECEMBER 1974 ON THE COMMON ORGANIZATION OF THE MARKET IN SUGAR ( OFFICIAL JOURNAL 1974 , L 359 , P . L ) AND THE ENVISAGED LEVY ON THE PRODUCTION OF ISOGLUCOSE IS ANALOGOUS TO THAT PROVIDED FOR IN ARTICLE 27 OF REGULATION NO 3330/74 , NAMELY TO THE LEVY ON A PERCENTAGE OF THE PRODUCTION OF SUGAR MANUFACTURED IN EXCESS OF THE BASIC QUOTA . 4 THE PRODUCTION LEVY SYSTEM FOR ISOGLUCOSE WAS ESTABLISHED BY ARTICLES 8 AND 9 OF REGULATION NO 1111/77 AND APPLIED TO THE 1977/78 AND 1978/79 SUGAR YEARS . ARTICLE 9 ( 1 ) OF THE REGULATION PROVIDED THAT MEMBER STATES WERE TO CHARGE A PRODUCTION LEVY ON MANUFACTURERS OF ISOGLUCOSE AND THE FIRST SUBPARAGRAPH OF ARTICLE 9 ( 2 ) PROVIDED THAT THE AMOUNT OF THE LEVY PER 100 KG OF DRY MATTER SHOULD BE EQUAL TO THE AMOUNT OF THE PRODUCTION LEVY PROVIDED FOR IN ARTICLE 27 OF REGULATION NO 3330/74 FOR THE SAME PERIOD TO WHICH THE LATTER AMOUNT APPLIED . HOWEVER , UNDER THE SECOND SUBPARAGRAPH OF ARTICLE 9 ( 2 ), FOR THE PERIOD FROM 1 JULY 1977 TO 30 JUNE 1978 THE AMOUNT OF THE LEVY REFERRED TO IN PARAGRAPH ( 1 ) MIGHT NOT EXCEED THE AMOUNT OF FIVE UNITS OF ACCOUNT PER 100 KG OF DRY MATTER . 5 IN ITS JUDGMENT OF 25 OCTOBER 1978 GIVEN IN ANSWER TO A REFERENCE FOR A PRELIMINARY RULING FROM THE HIGH COURT OF JUSTICE , QUEEN ' S BENCH DIVISION , COMMERCIAL COURT , IN JOINED CASES 103 AND 145/77 , ROYAL SCHOLTEN-HONIG ( HOLDINGS ) LIMITED V INTERVENTION BOARD FOR AGRICULTURAL PRODUCE ; TUNNEL REFINERIES LIMITED V INTERVENTION BOARD FOR AGRICULTURAL PRODUCE (( 1978 ) ECR 2037 ), THE COURT RULED THAT REGULATION NO 1111/77 WAS INVALID TO THE EXTENT TO WHICH ARTICLES 8 AND 9 THEREOF IMPOSED A PRODUCTION LEVY ON ISOGLUCOSE OF FIVE UNITS OF ACCOUNT PER 100 KG OF DRY MATTER FOR THE PERIOD CORRESPONDING TO THE SUGAR MARKETING YEAR 1977/1978 . THE COURT HAD FOUND THAT THE PROVISIONS OF THAT REGULATION ESTABLISHING THE PRODUCTION LEVY SYSTEM FOR ISOGLUCOSE OFFENDED AGAINST THE GENERAL PRINCIPLE OF EQUALITY OF WHICH THE PROHIBITION ON DISCRIMINATION SET OUT IN ARTICLE 40 ( 3 ) OF THE TREATY WAS A SPECIFIC EXPRESSION . HOWEVER , IT HAD ADDED THAT ITS ANSWER WOULD LEAVE THE COUNCIL FREE TO TAKE ANY NECESSARY MEASURES COMPATIBLE WITH COMMUNITY LAW FOR ENSURING THE PROPER FUNCTIONING OF THE MARKET IN SWEETENERS . 6 FOLLOWING THAT JUDGMENT THE COMMISSION , BY LETTER DATED 8 JANUARY 1979 , INFORMED THE MEMBER STATES THAT , PENDING MEASURES TO BE ADOPTED BY THE COUNCIL TO ENSURE THE PROPER FUNCTIONING OF THE MARKET IN SWEETENERS , IT WAS APPROPRIATE TO SUSPEND ALL COLLECTIONS OF THE ISOGLUCOSE PRODUCTION LEVY AND THAT , SIMILARLY , THE ESTABLISHMENT , ACCOUNTING AND ALLOCATION TO OWN RESOURCES OF THE AMOUNTS CONCERNED SHOULD BE PROVISIONALLY SUSPENDED BY MEMBER STATES . 7 ON 25 JUNE 1979 THE COUNCIL ADOPTED REGULATION NO 1293/79 ( OFFICIAL JOURNAL 1979 , L 162 , P . 10 ) AMENDING REGULATION NO 1111/77 IN THE LIGHT OF THE JUDGMENT OF THE COURT OF 25 OCTOBER 1978 . SINCE THE MOST APPROPRIATE MEANS FOR AVOIDING INEQUALITY OF TREATMENT BETWEEN PRODUCERS OF SUGAR AND PRODUCERS OF ISOGLUCOSE WAS TO SUBJECT ISOGLUCOSE PRODUCTION TO RULES ANALOGOUS TO THOSE APPLYING TO SUGAR PRODUCTION UNTIL 30 JUNE 1980 , REGULATION NO 1293/79 IN PARTICULAR ESTABLISHED , ON A TRANSITIONAL BASIS UNTIL THAT DATE , A TEMPORARY SYSTEM OF PRODUCTION QUOTAS FOR ISOGLUCOSE . IT WAS ALSO PROVIDED THAT FOR THE QUANTITY OF ISOGLUCOSE PRODUCED WHICH EXCEEDED THE BASIC QUOTA WITHOUT EXCEEDING THE MAXIMUM QUOTA MEMBER STATES WERE TO CHARGE A PRODUCTION LEVY ON THE ISOGLUCOSE PRODUCER CONCERNED , THE AMOUNT OF WHICH WAS TO BE EQUAL TO THE SHARE OF THE SUGAR PRODUCTION LEVY AS FIXED FOR THE 1979/80 SUGAR YEAR BY VIRTUE OF ARTICLE 28 OF REGULATION NO 3330/74 , BORNE BY THE SUGAR MANUFACTURERS . AS REGARDS THE PRODUCTION LEVY ESTABLISHED BY REGULATION NO 1111/77 AND DECLARED INVALID BY THE ABOVE-MENTIONED JUDGMENT , IT WAS ABOLISHED BY ARTICLE 2 ( 1 ) OF REGULATION NO 1293/79 WITH EFFECT FROM 1 JULY 1977 . 8 IN THE COURSE OF THE ORAL PROCEDURE IN THIS CASE THE APPLICANT STATED THAT IT HAD PAID THE LEVY IN RESPECT OF THE ISOGLUCOSE PRODUCTION IN A PILOT FACTORY AND HAD NOT YET OBTAINED A REFUND FROM THE NATIONAL AUTHORITIES . THE OBJECT OF THESE PROCEEDINGS IS NOT , HOWEVER , TO OBTAIN A REFUND OF THE LEVY BUT SOLELY TO OBTAIN COMPENSATION FROM THE COMMUNITY FOR LOSSES WHICH THE APPLICANT CLAIMS TO HAVE INCURRED BECAUSE THE INTRODUCTION OF THE PRODUCTION LEVY COMPELLED IT PERMANENTLY TO STOP MANUFACTURING ISOGLUCOSE . IT CLAIMS THAT THE DAMAGE CAUSED TO IT CONSISTS , ON THE ONE HAND , IN THE WRITING-OFF OF INVESTMENTS IN ISOGLUCOSE PRODUCTION IN TWO EXPERIMENTAL PLANTS IN THE NETHERLANDS AND A FACTORY BEING BUILT AT TILBURY , IN THE UNITED KINGDOM , WHICH WAS TO BE SPECIALLY EQUIPPED FOR ISOGLUCOSE PRODUCTION , THE COSTS OF ADMINISTRATION AND RESEARCH RELATING TO THE PRODUCT , AS WELL AS COSTS OF TAKING LEGAL ADVICE AND THE FINANCIAL CONSEQUENCES RELATING TO CONTRACTS MADE WITH OTHER UNDERTAKINGS FOR PURCHASING LICENCES AND OBTAINING ENZYME SUPPLIES . ON THE OTHER HAND THERE WERE LOSSES DUE TO THE SALE , SUBSEQUENT TO THE APPLICANT ' S BANKRUPTCY BUT PRIOR TO THE JUDGMENT OF THE COURT OF 25 OCTOBER 1978 , OF THE TILBURY FACTORY AT A PRICE WELL BELOW THE CONSTRUCTION COSTS , AS WELL AS THE LOSS OF ESTIMATED FUTURE PROFITS . 9 SINCE THE COURT HAS ALREADY ESTABLISHED IN ITS JUDGMENT OF 25 OCTOBER 1978 THAT THE IMPOSITION OF AN ISOGLUCOSE PRODUCTION LEVY OF FIVE UNITS OF ACCOUNT PER 100 KG OF DRY MATTER WAS INCOMPATIBLE WITH THE PRINCIPLE OF EQUALITY , THE FIRST QUESTION WHICH ARISES IN THESE CASES IS WHETHER THAT ILLEGALITY IS SUCH AS TO INVOLVE THE COMMUNITY IN LIABILITY UNDER THE SECOND PARAGRAPH OF ARTICLE 215 OF THE TREATY . 10 A FINDING THAT A LEGAL SITUATION RESULTING FROM LEGISLATIVE MEASURES BY THE COMMUNITY IS ILLEGAL IS INSUFFICIENT BY ITSELF TO INVOLVE IT IN LIABILITY . THE COURT HAS ALREADY STATED THIS IN ITS JUDGMENT OF 25 MAY 1978 IN JOINED CASES 83/76 AND OTHERS , BAYERISCHE HNL & OTHERS V COUNCIL AND COMMISSION (( 1978 ) ECR 1209 ). IN THIS CONNEXION THE COURT REFERRED TO ITS CONSISTENT CASE-LAW IN ACCORDANCE WITH WHICH THE COMMUNITY DOES NOT INCUR LIABILITY ON ACCOUNT OF A LEGISLATIVE MEASURE WHICH INVOLVES CHOICES OF ECONOMIC POLICY UNLESS A SUFFICIENTLY SERIOUS BREACH OF A SUPERIOR RULE OF LAW FOR THE PROTECTION OF THE INDIVIDUAL HAS OCCURRED . HAVING REGARD TO THE PRINCIPLES IN THE LEGAL SYSTEMS OF THE MEMBER STATES , GOVERNING THE LIABILITY OF PUBLIC AUTHORITIES FOR DAMAGE CAUSED TO INDIVIDUALS BY LEGISLATIVE MEASURES , THE COURT HAS STATED THAT IN THE CONTEXT OF COMMUNITY LEGISLATION IN WHICH ONE OF THE CHIEF FEATURES IS THE EXERCISE OF A WIDE DISCRETION ESSENTIAL FOR THE IMPLEMENTATION OF THE COMMON AGRICULTURAL POLICY , THE LIABILITY OF THE COMMUNITY CAN ARISE ONLY EXCEPTIONALLY IN CASES IN WHICH THE INSTITUTION CONCERNED HAS MANIFESTLY AND GRAVELY DISREGARDED THE LIMITS ON THE EXERCISE OF ITS POWERS . 11 THIS IS CONFIRMED IN PARTICULAR BY THE FACT THAT , EVEN THOUGH AN ACTION FOR DAMAGES UNDER ARTICLES 178 AND 215 OF THE TREATY CONSTITUTES AN INDEPENDENT ACTION , IT MUST NEVERTHELESS BE ASSESSED HAVING REGARD TO THE WHOLE OF THE SYSTEM OF LEGAL PROTECTION OF INDIVIDUALS SET UP BY THE TREATY . IF AN INDIVIDUAL TAKES THE VIEW THAT HE IS INJURED BY A COMMUNITY LEGISLATIVE MEASURE WHICH HE REGARDS AS ILLEGAL HE HAS THE OPPORTUNITY , WHEN THE IMPLEMENTATION OF THE MEASURE IS ENTRUSTED TO NATIONAL AUTHORITIES , TO CONTEST THE VALIDITY OF THE MEASURE , AT THE TIME OF ITS IMPLEMENTATION , BEFORE A NATIONAL COURT IN AN ACTION AGAINST THE NATIONAL AUTHORITY . SUCH A COURT MAY , OR EVEN MUST , IN PURSUANCE OF ARTICLE 177 , REFER TO THE COURT OF JUSTICE A QUESTION ON THE VALIDITY OF THE COMMUNITY MEASURE IN QUESTION . THE EXISTENCE OF SUCH AN ACTION IS BY ITSELF OF SUCH A NATURE AS TO ENSURE THE EFFICIENT PROTECTION OF THE INDIVIDUALS CONCERNED . 12 THESE CONSIDERATIONS ARE OF IMPORTANCE WHERE , AS IN THESE CASES , THE COURT , WITHIN THE FRAMEWORK OF A REFERENCE FOR A PRELIMINARY RULING , HAS DECLARED A PRODUCTION LEVY TO BE ILLEGAL AND WHERE THE COMPETENT INSTITUTION , FOLLOWING THAT FINDING , HAS ABOLISHED THE LEVY CONCERNED WITH RETROACTIVE EFFECT . 13 IT IS APPROPRIATE TO INQUIRE IN THE LIGHT OF THESE CONSIDERATIONS WHETHER , IN THE CIRCUMSTANCES OF THESE CASES , THERE HAS BEEN , ON THE PART OF THE COUNCIL AND THE COMMISSION , A GRAVE AND MANIFEST DISREGARD OF THE LIMITS WHICH THEY ARE REQUIRED TO OBSERVE IN EXERCISING THEIR DISCRETION WITHIN THE FRAMEWORK OF THE COMMON AGRICULTURAL POLICY . 14 IN THIS RESPECT IT MUST BE RECALLED THAT THE COURT DID NOT DECLARE INVALID ANY ISOGLUCOSE PRODUCTION LEVY BUT ONLY THE METHOD OF CALCULATION ADOPTED AND THE FACT THAT THE LEVY APPLIED TO THE WHOLE OF THE ISOGLUCOSE PRODUCTION . HAVING REGARD TO THE FACT THAT THE PRODUCTION OF ISOGLUCOSE WAS PLAYING A PART IN INCREASING SUGAR SURPLUSES IT WAS PERMISSIBLE FOR THE COUNCIL TO IMPOSE RESTRICTIVE MEASURES ON SUCH PRODUCTION . 15 ALTHOUGH , IN ITS JUDGMENT OF 25 OCTOBER 1978 , GIVING A PRELIMINARY RULING WITHIN THE FRAMEWORK OF A CONSIDERATION OF THE VALIDITY OF REGULATION NO 1111/77 , THE COURT FOUND THAT THE CHARGES BORNE IN PURSUANCE OF THAT REGULATION BY ISOGLUCOSE PRODUCERS BY WAY OF PRODUCTION LEVY WERE MANIFESTLY UNEQUAL AS COMPARED WITH THOSE IMPOSED ON SUGAR PRODUCERS , IT DOES NOT FOLLOW THAT , FOR THE PURPOSES OF AN ASSESSMENT OF THE ILLEGALITY OF THE MEASURE IN CONNEXION WITH ARTICLE 215 OF THE TREATY , THE COUNCIL HAS MANIFESTLY AND GRAVELY DISREGARDED THE LIMITS ON THE EXERCISE OF ITS DISCRETION . 16 IN FACT , EVEN THOUGH THE FIXING OF THE ISOGLUCOSE PRODUCTION LEVY AT FIVE UNITS OF ACCOUNT PER 100 KG OF DRY MATTER WAS VITIATED BY ERRORS , IT MUST NEVERTHELESS BE POINTED OUT THAT , HAVING REGARD TO THE FACT THAT AN APPROPRIATE LEVY WAS FULLY JUSTIFIED , THESE WERE NOT ERRORS OF SUCH GRAVITY THAT IT MAY BE SAID THAT THE CONDUCT OF THE DEFENDANT INSTITUTIONS IN THIS RESPECT WAS VERGING ON THE ARBITRARY AND WAS THUS OF SUCH A KIND AS TO INVOLVE THE COMMUNITY IN NON-CONTRACTUAL LIABILITY . 17 IT MUST ALSO BE RECALLED THAT REGULATION NO 1111/77 WAS ADOPTED IN PARTICULAR TO DEAL WITH AN EMERGENCY SITUATION CHARACTERIZED BY GROWING SURPLUSES OF SUGAR AND IN CIRCUMSTANCES WHICH , IN ACCORDANCE WITH THE PRINCIPLES SET OUT IN ARTICLE 39 OF THE TREATY PERMITTED A CERTAIN PREFERENCE IN FAVOUR OF SUGAR BEET , COMMUNITY PRODUCTION OF WHICH WAS IN SURPLUS , WHILST COMMUNITY PRODUCTION OF MAIZE WAS TO A CONSIDERABLE EXTENT DEFICIENT . 18 IT FOLLOWS FROM THESE CONSIDERATIONS THAT THE COUNCIL AND THE COMMISSION DID NOT DISREGARD THE LIMITS WHICH THEY WERE REQUIRED TO OBSERVE IN THE EXERCISE OF THEIR DISCRETION IN THE CONTEXT OF THE COMMON AGRICULTURAL POLICY IN SUCH A SERIOUS MANNER AS TO INCUR THE NON-CONTRACTUAL LIABILITY OF THE COMMUNITY . 19 THE APPLICATION MUST BE DISMISSED AS UNFOUNDED . COSTS 20 UNDER ARTICLE 69 ( 2 ) OF THE RULES OF PROCEDURE , THE UNSUCCESSFUL PARTY SHALL BE ORDERED TO PAY THE COSTS . 21 AS THE APPLICANT HAS BEEN UNSUCCESSFUL IT MUST BE ORDERED TO PAY THE COSTS . ON THOSE GROUNDS , THE COURT HEREBY : 1 . DISMISSES THE APPLICATION ; 2 . ORDERS THE APPLICANT TO PAY THE COSTS . © European Communities, 2001 All rights reserved BAILII: Copyright Policy | Disclaimers | Privacy Policy | Feedback | Donate to BAILII URL: https://www.bailii.org/eu/cases/EUECJ/1979/C14377.html