1BY ORDERS DATED 29 JULY AND 8 NOVEMBER 1977 WHICH REACHED THE COURT ON 8 AUGUST AND 24 NOVEMBER 1977 RESPECTIVELY THE HIGH COURT OF JUSTICE , QUEEN ' S BENCH DIVISION , COMMERCIAL COURT , REQUESTED THE COURT IN PURSUANCE OF ARTICLE 177 OF THE EEC TREATY TO GIVE A PRELIMINARY RULING ON THE VALIDITY OF CERTAIN PROVISIONS OF COUNCIL REGULATION ( EEC ) NO 1862/76 OF 27 JULY 1976 AMENDING REGULATION ( EEC ) NO 2742/75 ON PRODUCTION REFUNDS IN THE CEREALS AND RICE SECTORS ( OFFICIAL JOURNAL L 206 , P . 3 ) AND ON THE VALIDITY OF COUNCIL REGULATIONS ( EEC ) NOS 1111/77 OF 17 MAY 1977 LAYING DOWN COMMON PROVISIONS FOR ISOGLUCOSE ( OFFICIAL JOURNAL L 134 , P . 4 ) AND 1110/77 OF THE SAME DATE AMENDING REGULATION ( EEC ) NO 3330/74 ON THE COMMON ORGANIZATION OF THE MARKET IN SUGAR ( OFFICIAL JOURNAL L 134 , P . 1 )
2THE QUESTIONS PUT BY THE NATIONAL COURT AROSE IN THE CONTEXT OF ACTIONS UNDERTAKEN AGAINST THE INTERVENTION BOARD FOR AGRICULTURAL PRODUCE BY THE PLAINTIFFS WHO MAINTAIN THAT THE UNITED KINGDOM GOVERNMENT IS NOT ENTITLED TO IMPLEMENT : ( 1 ) REGULATION NO 1862/76 TO THE EXTENT TO WHICH IT SUPPLEMENTED REGULATION NO 2742/75 BY INSERTING A NEW ARTICLE 5A ; AND ( 2 ) REGULATIONS NOS 1111/77 AND 1110/77 .
3THE FILE SHOWS THAT THE PLAINTIFFS BEFORE THE NATIONAL COURT ARE STARCH PRODUCERS WHO MANUFACTURE OR ARE INTENDING TO MANUFACTURE ISOGLUCOSE , A GLUCOSE SYRUP HAVING A HIGH FRUCTOSE CONTENT , THE SALE OF WHICH ON THE COMMUNITY MARKET IN APPRECIABLE QUANTITIES GOES BACK ONLY TO 1976 AND WHICH IS MANUFACTURED FROM STARCH OBTAINED FROM VARIOUS CEREALS BUT MOST FREQUENTLY FROM MAIZE , A SUBSTANTIAL PART OF WHICH IS IMPORTED FROM NON- MEMBER COUNTRIES .
4ALTHOUGH ISOGLUCOSE HAS IN MANY RESPECTS THE SAME CHARACTERISTICS AS CANE OR BEET SUGAR IT DIFFERS IN CERTAIN RESPECTS FROM THE TWO LATTER PRODUCTS ESPECIALLY INASMUCH AS , IN THE PRESENT STATE OF TECHNICAL KNOWLEDGE , IT CANNOT BE CRYSTALLIZED AND AT PRESENT CAN ONLY COMPETE WITH SUGAR IN INDUSTRIES USING SUGAR IN A LIQUID FORM .
5FOR THE PURPOSES OF THE ANSWER TO BE GIVEN TO THE QUESTIONS RAISED BY THE NATIONAL COURT IT IS APPROPRIATE TO EXAMINE SEPARATELY REGULATION NO 1862/76 ON THE ONE HAND AND REGULATIONS NOS 1111/77 AND 1110/77 ON THE OTHER .
REGULATION NO 1862/76 ( PRODUCTION REFUND )
6IN ORDER TO ASSESS THE VALIDITY OF REGULATION NO 1862/76 IT IS APPROPRIATE TO EXAMINE IN THE FIRST PLACE THE LEGAL SITUATION AS IT EXISTED PRIOR TO THE ENTRY INTO FORCE OF THAT REGULATION IN THE MATTER OF THE SYSTEM OF PRODUCTION REFUNDS IN THE CEREALS SECTOR .
7ACCORDING TO THE NINTH RECITAL IN THE PREAMBLE TO REGULATION ( EEC ) NO 2727/75 OF THE COUNCIL OF 29 OCTOBER 1975 ON THE COMMON ORGANIZATION OF THE MARKET IN CEREALS ( OFFICIAL JOURNAL 1975 L 281 P . 1 ): ' ' IN VIEW OF THE SPECIAL MARKET SITUATION FOR CEREAL STARCH , POTATO STARCH AND GLUCOSE PRODUCED BY THE ' DIRECT HYDROLYSIS ' PROCESS IT MAY PROVE NECESSARY TO PROVIDE FOR A PRODUCTION REFUND OF SUCH A NATURE THAT THE BASIC PRODUCTS USED BY THIS INDUSTRY CAN BE MADE AVAILABLE TO IT AT A LOWER PRICE THAN THAT RESULTING FROM THE APPLICATION OF THE SYSTEM OF LEVIES AND COMMON PRICES . ' '
8ARTICLE 11 ( 1 ) OF THE REGULATION PROVIDES THAT A PRODUCTION REFUND ' ' MAY BE GRANTED :
( A ) FOR MAIZE AND COMMON WHEAT USED IN THE COMMUNITY FOR THE MANUFACTURE OF STARCH ;
( B ) FOR POTATO STARCH ;
( C ) FOR MAIZE GROATS AND MEAL USED IN THE COMMUNITY FOR THE MANUFACTURE OF GLUCOSE BY DIRECT HYDROLYSIS ' ' .
9UNDER ARTICLE 11 ( 3 ) THE COUNCIL , ACTING BY A QUALIFIED MAJORITY ON A PROPOSAL FROM THE COMMISSION , IS TO ADOPT RULES FOR THE APPLICATION OF THE ARTICLE AND FIX THE AMOUNT OF THE PRODUCTION REFUND .
10IN PURSUANCE OF THAT PROVISION THE COUNCIL ADOPTED REGULATION NO 2742/75 OF 29 OCTOBER 1975 ON PRODUCTION REFUNDS IN THE CEREALS AND RICE SECTORS ( OFFICIAL JOURNAL L 281 , P . 57 ) BY WHICH , ON THE BASIS IN PARTICULAR OF ' ' AN ASSESSMENT OF THE SITUATION RESULTING FORM THE LEVEL OF COMMON PRICES AND FROM THE COMPETITION BETWEEN , ON THE ONE HAND , MAIZE STARCH , RICE STARCH AND POTATO STARCH AND , ON THE OTHER , THE SUBSTITUTE CHEMICAL PRODUCTS ' ' ( SECOND RECITAL IN THE PREAMBLE TO THE REGULATION ), IT FIXED THE AMOUNTS OF THE PRODUCTION REFUND FOR THOSE PRODUCTS .
11BY REGULATION ( EEC ) NO 1862/76 , WHICH ENTERED INTO FORCE ON 1 AUGUST 1976 , THE COUNCIL AMENDED REGULATION NO 2742/75 HAVING REGARD TO THE FACT THAT ' ' IN VIEW OF THE SITUATION WHICH WILL EXIST AS FROM THE BEGINNING OF THE 1976/77 MARKETING YEAR , PARTICULARLY AS A RESULT OF THE APPLICATION FOR THAT MARKETING YEAR OF COMMON PRICES FOR CEREALS AND RICE , IT IS NECESSARY TO INCREASE THE PRODUCTION REFUNDS ; . . . HOWEVER , GIVEN THE OBJECTIVES OF THE PRODUCTION REFUND SYSTEM , SUCH AN INCREASE SHOULD NOT BE RETAINED IN THE CASE OF PRODUCTS USED IN THE MANUFACTURE OF GLUCOSE HAVING A HIGH FRUCTOSE CONTENT ; . . . THE BEST METHOD OF IMPLEMENTING A MEASURE OF THIS TYPE IS TO PROVIDE FOR RECOVERY FROM THE MANUFACTURERS CONCERNED OF THE AMOUNT OF THE INCREASE IN PRODUCTION REFUNDS ACCORDING TO THE PRODUCT USED ' ' .
12ALTHOUGH , IN PURSUANCE OF ARTICLE 1 OF THAT REGULATION PRODUCTION REFUNDS WERE INCREASED , ARTICLE 2 , WHICH ADDED A NEW ARTICLE 5A TO REGULATION NO 2742/75 , LAID DOWN SPECIAL RULES AS REGARDS THE PRODUCTION REFUND FOR ONLY ONE PRODUCT PROCESSED FROM STARCH , GLUCOSE HAVING A HIGH FRUCTOSE CONTENT .
13ACCORDING TO THAT ARTICLE THE AMOUNT OF THE REFUND FOR STARCH PROCESSED INTO THAT PRODUCT IS MAINTAINED AT THE LEVEL OF THAT OF THE PREVIOUS MARKETING YEAR AND IS ABOLISHED AS FROM THE 1977/78 MARKETING YEAR .
14UNDER THE NEW ARTICLE 5A ( 3 ) THE DIFFERENCE BETWEEN THE AMOUNT OF THE PRODUCTION REFUND FOR STARCH PROCESSED INTO GLUCOSE HAVING A HIGH FRUCTOSE CONTENT AND THE AMOUNT FOR STARCH USED FOR ANY OTHER PURPOSE IS TO BE RECOVERED BY MEMBER STATES FROM MANUFACTURERS .
15THEREFORE , IN THE CASE OF PRODUCTS USED SUBSEQUENTLY FOR THE MANUFACTURE OF GLUCOSE HAVING A HIGH FRUCTOSE CONTENT , ARTICLE 2 OF REGULATION NO 1862/76 BY USING THE EXPEDIENT OF ' ' RECOVERY ' ' IN FACT REFUSED THE INCREASE IN THE PRODUCTION REFUND FOR THE 1976/77 MARKETING YEAR AND ABOLISHED IT AS FROM THE FOLLOWING MARKETING YEAR .
16ALTHOUGH IN CASE 103/77 THE NATIONAL COURT ONLY ASKS IN GENERAL TERMS WHETHER REGULATION NO 1862/76 IS VALID IN SO FAR AS IT PURPORTS TO INSERT ARTICLE 5A IN REGULATION NO 2742/75 , THE PLAINTIFF IN ITS WRITTEN OBSERVATIONS PUTS FORWARD THREE SUBMISSIONS REGARDING THE VALIDITY OF REGULATION NO 1862/76 .
17IT IS THEREFORE APPROPRIATE TO REPLY TO THE QUESTION WHICH HAS BEEN RAISED BY A CONSIDERATION OF THE VALIDITY OF THAT REGULATION ON THE BASIS OF THE ABOVE- MENTIONED SUBMISSIONS .
18FIRST , ACCORDING TO THE PLAINTIFF , REGULATION NO 1862/76 DOES NOT PROVIDE A STATEMENT OF THE REASONS ON WHICH ARTICLE 2 IS BASED AND ACCORDINGLY INFRINGES THE PROVISIONS OF ARTICLE 190 OF THE TREATY .
19THE REASONS ON WHICH ARTICLE 2 OF REGULATION NO 1862/76 IS BASED , IN SO FAR AS THEY EMERGE FROM THE PREAMBLE TO THAT REGULATION , ARE LIMITED TO THE MERE STATEMENT THAT , ' ' GIVEN THE OBJECTIVES OF THE PRODUCTION REFUND SYSTEM , SUCH AN INCREASE SHOULD NOT BE RETAINED IN THE CASE OF PRODUCTS USED IN THE MANUFACTURE OF GLUCOSE HAVING A HIGH FRUCTOSE CONTENT ' ' .
20HOWEVER , THE STATEMENT OF REASONS , LACONIC AS IT IS , EVEN OMITTING TO MENTION THE ABOLITION OF REFUNDS FOR THE MANUFACTURE OF THAT PRODUCT , MUST NEVERTHELESS BE EXAMINED AND ASSESSED IN THE CONTEXT OF THE WHOLE OF THE RULES OF WHICH REGULATION NO 1862/76 FORMS AN INTEGRAL PART .
21THE STATEMENTS QUOTED ABOVE FROM THE PREAMBLES TO REGULATIONS NOS 2727/75 AND 2742/75 SHOW THAT THE PRIMARY OBJECTIVE OF PRODUCTION REFUNDS , AS REGARDS THE MARKET IN STARCHES , IS TO ABOLISH THE DISADVANTAGE TO WHICH THE STARCH INDUSTRY IS SUBJECTED BY REASON OF THE APPLICATION OF COMMON PRICES FOR THE RAW MATERIALS USED BY THE INDUSTRY AND TO ENABLE IT TO MAINTAIN COMPETITIVE PRICES IN COMPARISON WITH THE PRICES OF SUBSTITUTE CHEMICAL PRODUCTS .
22WHEN CONSIDERED IN THE CONTEXT OF THE SYSTEM IN WHICH THEY TOOK EFFECT , THE REFUSAL TO INCREASE THE REFUND AND ITS SUBSEQUENT ELIMINATION FOR STARCH INTENDED FOR THE MANUFACTURE OF ISOGLUCOSE , A PRODUCT WHICH IS NOT OR IS HARDLY IN COMPETITION WITH SUBSTITUTE CHEMICAL PRODUCTS , MAY BE EXPLAINED BY THE NATURE OF THE OBJECTIVES OF THE SYSTEM OF PRODUCTION REFUNDS TO WHICH REFERENCE IS MADE IN THE PREAMBLE TO REGULATION NO 1862/76 .
23THAT REFERENCE TO THE PURPOSES OF THE REFUND SYSTEM , WHICH MOREOVER ARE WELL KNOWN TO THE CIRCLES CONCERNED , SATISFIES THE REQUIREMENT UNDER ARTICLE 190 OF THE TREATY FOR A STATEMENT OF REASONS AND THUS THE VALIDITY OF REGULATION NO 1862/76 CANNOT BE CHALLENGED ON THOSE GROUNDS .
24THE PLAINTIFF FURTHER CLAIMS THAT REGULATION NO 1862/76 , BY CREATING AN EXCEPTIONAL SITUATION FOR PRODUCERS OF STARCH INTENDED FOR THE PRODUCTION OF ISOGLUCOSE , IS DISCRIMINATING BETWEEN THEM AND MANUFACTURERS OF STARCH INTENDED FOR OTHER PURPOSES AND THAT THIS IS CONTRARY TO THE PRINCIPLE OF NON- DISCRIMINATION SET OUT IN THE SECOND SUBPARAGRAPH OF ARTICLE 40 ( 3 ) OF THE TREATY .
25THE SECOND SUBPARAGRAPH OF ARTICLE 40 ( 3 ) OF THE TREATY PROVIDES THAT THE COMMON ORGANIZATION OF AGRICULTURAL MARKETS ' ' SHALL EXCLUDE ANY DISCRIMINATION BETWEEN PRODUCERS OR CONSUMERS WITHIN THE COMMUNITY ' ' .
26THE PROHIBITION OF DISCRIMINATION LAID DOWN IN THE ABOVE-MENTIONED PROVISION IS MERELY A SPECIFIC ENUNCIATION OF THE GENERAL PRINCIPLE OF EQUALITY WHICH IS ONE OF THE FUNDAMENTAL PRINCIPLES OF COMMUNITY LAW .
27THAT PRINCIPLE REQUIRES THAT SIMILAR SITUATIONS SHALL NOT BE TREATED DIFFERENTLY UNLESS THE DIFFERENTIATION IS OBJECTIVELY JUSTIFIED .
28IT MUST THEREFORE BE ASCERTAINED WHETHER ISOGLUCOSE IS IN A SITUATION COMPARABLE TO THAT OF OTHER PRODUCTS OF THE STARCH INDUSTRY , IN PARTICULAR IN THE SENSE THAT THEY CAN BE SUBSTITUTED FOR ISOGLUCOSE IN THE SPECIFIC USE TO WHICH THE LATTER PRODUCT IS NORMALLY PUT .
29IT IS CLEAR THAT THERE IS NO COMPETITION BETWEEN STARCH AND ISOGLUCOSE OR BETWEEN ISOGLUCOSE AND THE OTHER PRODUCTS DERIVED FROM STARCH EXCEPT POSSIBLY GLUCOSE .
30IT EMERGES FROM THE FILE THAT THE CONSIDERABLE DIFFERENCES IN THE SWEETENING POWERS OF ISOGLUCOSE ON THE ONE HAND AND GLUCOSE ON THE OTHER MEAN THAT THE TWO PRODUCTS HAVE DIFFERENT APPLICATIONS SO THAT THEY CANNOT BE IN A COMPARABLE COMPETITIVE SITUATION WITH REGARD ONE TO THE OTHER .
31FURTHERMORE AS ISOGLUCOSE IS A PRODUCT WHICH IS AT LEAST PARTIALLY INTERCHANGEABLE WITH SUGAR , THE MAINTENANCE OF THE PRODUCTION REFUND IN FAVOUR OF MANUFACTURERS OF ISOGLUCOSE MIGHT AT A SUBSEQUENT STAGE HAVE CONSTITUTED DISCRIMINATION AGAINST MANUFACTURERS OF SUGAR WHO , FOR THEIR PART , DO NOT ENJOY AN EQUIVALENT ADVANTAGE .
32HENCE ARTICLE 2 OF REGULATION NO 1862/76 DOES NOT INFRINGE THE RULE OF NON-DISCRIMINATION BETWEEN COMMUNITY PRODUCERS SET OUT IN THE SECOND SUBPARAGRAPH OF ARTICLE 40 ( 3 ) OF THE TREATY .
33FINALLY THE PLAINTIFF IN CASE 103/77 CONTESTS THE VALIDITY OF REGULATION NO 1862/76 BY CLAIMING THAT , TO THE EXTENT TO WHICH THE REGULATION LAYS DOWN SPECIAL RULES ABOLISHING THE PRODUCTION REFUND FOR STARCH INTENDED FOR THE PRODUCTION OF ISOGLUCOSE , IT EXCEEDED THE POWERS CONFERRED ON THE COUNCIL IN PURSUANCE OF ARTICLE 11 OF REGULATION NO 2727/75 .
34HENCE , AS IT COULD NOT BE CONSIDERED AS A MERE RULE OF APPLICATION WITHIN THE MEANING OF ARTICLE 11 , REGULATION NO 1862/76 COULD ONLY HAVE BEEN ADOPTED AFTER THE COMPLETION OF THE PROCEDURE REFERRED TO IN THE THIRD SUBPARAGRAPH OF ARTICLE 43 ( 2 ) OF THE TREATY , INCLUDING CONSULTATION WITH THE ASSEMBLY .
35IT HAS ALREADY BEEN ESTABLISHED THAT THE EXCLUSION BY ARTICLE 2 OF REGULATION NO 1862/76 OF STARCH INTENDED FOR ISOGLUCOSE PRODUCTION FROM THE PRODUCTION REFUNDS SYSTEM WAS IN CONFORMITY WITH THE OBJECTIVES OF THAT REGULATION .
36THE MEASURE MUST THEREFORE BE REGARDED AS HAVING BEEN ADOPTED IN CONFORMITY WITH THE POWERS CONFERRED ON THE COUNCIL BY ARTICLE 11 OF REGULATION NO 2727/75 AND CONSEQUENTLY AS A RULE ADOPTED FOR THE APPLICATION OF THAT ARTICLE , FOR WHICH CONSULTATION WITH THE ASSEMBLY IS NOT REQUIRED BY THE TREATY .
37IT FOLLOWS FROM THE FOREGOING THAT CONSIDERATION OF THE QUESTION RAISED BY THE NATIONAL COURT HAS DISCLOSED NO FACTOR OF SUCH A KIND AS TO AFFECT THE VALIDITY OF REGULATION NO 1862/76 .
REGULATIONS NOS 1110/77 AND 1111/77 ( PRODUCTION LEVY )
38IN ORDER TO ASSESS THE VALIDITY OF REGULATIONS NOS 1110/77 AND 1111/77 IT IS APPROPRIATE TO CONSIDER FIRST CERTAIN ASPECTS OF THE COMMON ORGANIZATION OF THE MARKET IN SUGAR .
39TITLE III OF REGULATION NO 3330/74 PROVIDES QUOTA ARRANGEMENTS FOR SUGAR PRODUCERS FOR THE SUGAR MARKETING YEARS 1975/76 TO 1979/80 INCLUSIVE ON THE FOLLOWING LINES :
( A ) IN ACCORDANCE WITH ARTICLE 24 EACH UNDERTAKING IS ALLOTTED A BASIC QUOTA , CALLED ' ' QUOTA A ' ' AND MAY SELL THE SUGAR PRODUCED WITHIN THAT QUOTA DIRECTLY ON THE COMMUNITY MARKET AT THE INTERVENTION PRICE ;
( B ) PURSUANT TO ARTICLE 25 EACH UNDERTAKING MAY IN ADDITION BE ALLOTTED A QUOTA , CALLED ' ' QUOTA B ' ' , EQUAL TO ITS QUOTA A MULTIPLIED BY A COEFFICIENT AND MAY ALSO SELL ON THE COMMUNITY MARKET THE SUGAR PRODUCED WITHIN THESE LIMITS ON PAYMENT OF A PRODUCTION LEVY ( ARTICLE 27 );
( C ) THE SUGAR PRODUCED OVER AND ABOVE THE QUOTAS A AND E , CALLED ' ' SUGAR C ' ' MAY NOT BE DISPOSED OF ON THE INTERNAL MARKET AND MUST BE EXPORTED IN THE NATURAL STATE ON THE WORLD MARKET BEFORE 1 JANUARY FOLLOWING THE END OF THE SUGAR MARKETING YEAR DURING WHICH IT HAS BEEN PRODUCED ( ARTICLE 26 ).
40UNDER ARTICLE 27 ( 2 ) OF THE ABOVE-MENTIONED REGULATION THE PRODUCTION LEVY IS TO BE CALCULATED PER UNIT OF WEIGHT BY DIVIDING TOTAL LOSSES INCURRED IN MARKETING THE QUANTITY PRODUCED IN THE COMMUNITY OUTSIDE THE GUARANTEED QUANTITY BY THE SUM OF THE QUANTITIES PRODUCED OUTSIDE THE BASIC QUOTA BY COMMUNITY UNDERTAKINGS .
41UNDER ARTICLE 27 ( 3 ) THE PRODUCTION LEVY IS NOT TO EXCEED A MAXIMUM AMOUNT WHICH IS NOT TO BE HIGHER THAN 30 % OF THE INTERVENTION PRICE .
42UNDER ARTICLE 2 ( 2 ) OF COUNCIL REGULATION NO 1112/77 OF 17 MAY 1977 ( OFFICIAL JOURNAL L 134 , P . 9 ) THE INTERVENTION PRICE FOR WHITE SUGAR IS FIXED AT 32.83 UNITS OF ACCOUNT PER 100 KG FOR THE SUGAR MARKETING YEAR 1977/78 .
43UNDER ARTICLE 5 OF THE SAME REGULATION QUOTA B IS FIXED FOR THE SAME MARKETING YEAR AT 35 % OF QUOTA A .
44IT FOLLOWS THAT THE PRODUCTION LEVY FOR THE SAID MARKETING YEAR IS DUE AT MOST ON 35/135THS OR SLIGHTLY LESS THAN 26% OF THE TOTAL PRODUCTION OF SUGAR WITHIN QUOTAS A AND B .
45UNDER ARTICLE 6 OF COUNCIL REGULATION NO 1113/77 OF 17 MAY 1977 ( OFFICIAL JOURNAL L 134 , P . 11 ) THE MAXIMUM AMOUNT OF THE PRODUCTION LEVY IS FIXED FOR THE ABOVE-MENTIONED MARKETING YEAR AT 9.85 UNITS OF ACCOUNT PER 100 KG OF WHITE SUGAR .
46BY REGULATION NO 1111/77 THE COUNCIL LAID DOWN COMMON PROVISIONS FOR ISOGLUCOSE INVOLVING IN PARTICULAR A COMMON SYSTEM OF TRADE WITH NON- MEMBER COUNTRIES AND A PRODUCTION LEVY SYSTEM AND INSTITUTING A PROCEDURE INVOLVING CLOSE CO-OPERATION BETWEEN THE MEMBER STATES AND THE COMMISSION IN A MANAGEMENT COMMITTEE .
47THE SEVENTH RECITAL IN THE PREAMBLE TO THE REGULATION GIVES THE FOLLOWING REASONS FOR THE ESTABLISHMENT OF A SYSTEM OF PRODUCTION LEVIES :
' ' . . . 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 . ' '
48ACCORDING TO THE NINTH RECITAL THE ABOVE-MENTIONED LEVY SYSTEM IS COMPLEMENTARY TO THAT ESTABLISHED BY REGULATION NO 3330/74 , AS LAST AMENDED BY REGULATION NO 1110/77 AND THE ENVISAGED LEVY ON THE PRODUCTION OF ISOGLUCOSE IS ANALOGOUS TO THAT PROVIDED FOR IN ARTICLE 27 OF REGULATION NO 3330/74 AND CONSEQUENTLY CONSTITUTES OWN RESOURCES OF THE COMMUNITIES WITHIN THE MEANING OF ARTICLE 2 OF THE COUNCIL DECISION OF 21 APRIL 1970 ON THE REPLACEMENT OF FINANCIAL CONTRIBUTIONS FROM MEMBER STATES BY THE COMMUNITIES ' OWN RESOURCES ( OFFICIAL JOURNAL , ENGLISH SPECIAL EDITION 1970 ( I ), P . 224 ).
49THE SYSTEM OF PRODUCTION LEVIES IS ESTABLISHED BY ARTICLES 8 AND 9 OF THE REGULATION AND IS APPLICABLE TO THE PERIODS CORRESPONDING TO THE 1977/78 AND 1978/79 SUGAR MARKETING YEARS .
50ARTICLE 9 ( 1 ) OF THE REGULATION PROVIDES THAT THE MEMBER STATES SHALL CHARGE A PRODUCTION LEVY ON MANUFACTURERS OF ISOGLUCOSE AND PARAGRAPH ( 2 ) PROVIDES IN THE FIRST SUBPARAGRAPH THAT THE AMOUNT OF THE LEVY , PER 100 KG OF DRY MATTER , SHALL BE EQUAL TO THE AMOUNT OF THE PRODUCTION LEVY PROVIDED FOR IN ARTICLE 27 OF REGULATION ( EEC ) NO 3330/74 FOR THE SAME PERIOD TO WHICH THE LATTER AMOUNT APPLIES .
51HOWEVER , UNDER THE SECOND SUBPARAGRAPH OF ARTICLE 9 ( 2 ), FOR THE PERIOD 1 JULY 1977 TO 30 JUNE 1978 THE AMOUNT OF THE LEVY REFERRED TO IN PARAGRAPH ( 1 ) IS NOT TO EXCEED THE AMOUNT OF 5 UNITS OF ACCOUNT PER 100 KG OF DRY MATTER .
52IT IS THE LATTER AMOUNT WHICH IS TO APPLY WHEN THE AMOUNT OF THE PRODUCTION LEVY REFERRED TO IN ARTICLE 27 OF REGULATION NO 3330/74 EXCEEDS 5 UNITS OF ACCOUNT PER 100 KG OF WHITE SUGAR FOR THE SAME PERIOD .
53IN PURSUANCE OF ARTICLE 9 ( 3 ) THE DETAILED RULES FOR THE APPLICATION OF THE ARTICLE ARE TO BE ADOPTED IN ACCORDANCE WITH THE SO-CALLED MANAGEMENT COMMITTEE PROCEDURE .
54ARTICLE 1 OF COUNCIL REGULATION NO 1110/77 , IN VIEW OF THE FACT THAT ' ' THE INTRODUCTION OF COMMON MEASURES FOR ISOGLUCOSE . . . NECESSITATES THE EXCLUSION OF THIS PRODUCT FROM THE SCOPE OF COUNCIL REGULATION ( EEC ) NO 3330/74 ' ' , REMOVED ISOGLUCOSE FROM THE COMMON ORGANIZATION OF THE MARKET IN SUGAR .
55ACCORDING TO THE TERMS OF THE FOURTH RECITAL IN THE PREAMBLE TO THE SAID REGULATION ' ' THE PRODUCTION LEVY ON ISOGLUCOSE PROVIDED FOR IN ARTICLE 9 OF COUNCIL REGULATION ( EEC ) NO 1111/77 . . . IS BASED ESSENTIALLY ON THE NEED FOR ISOGLUCOSE PRODUCERS TO SHARE THE COSTS INCURRED BY THE SUGAR SECTOR INASMUCH AS THE SUBSTITUTION OF ISOGLUCOSE FOR SUGAR MAKES IT INEVITABLE , IN VIEW OF THE COMMUNITY SUGAR SURPLUS , FOR CORRESPONDING QUANTITIES OF SUGAR TO BE EXPORTED TO THIRD COUNTRIES ; . . . THE REVENUE FROM THE PRODUCTION LEVY ON ISOGLUCOSE SHOULD THEREFORE BE SET AGAINST THESE MARKETING LOSSES ' ' .
56UNDER ARTICLE 4 OF THE REGULATION THE TOTAL LOSSES MENTIONED IN ARTICLE 27 ( 2 ) OF REGULATION NO 3330/74 ARE TO BE REDUCED INTER ALIA BY THE AMOUNT OF THE PRODUCTION LEVY REFERRED TO IN ARTICLE 9 OF REGULATION NO 1111/77 .
57THE NATIONAL COURT HAS ASKED WHETHER REGULATIONS NOS 1111/77 AND 1110/77 ARE INVALID ON ONE OR MORE OF THE GROUNDS PLEADED BEFORE IT BY THE PLAINTIFFS .
58IT APPEARS FROM THE FILE THAT THE MOST IMPORTANT GROUNDS PLEADED AGAINST THE VALIDITY OF THE RULES IN QUESTION MAY BE SUMMARIZED AS FOLLOWS :
( A ) THEY OFFEND AGAINST THE PRINCIPLE OF PROPORTIONALITY BY IMPOSING ON ISOGLUCOSE MANUFACTURES AN ALTOGETHER UNFAIR CHARGE TO THE ADVANTAGE OF SUGAR MANUFACTURERS ;
( B ) THEY CONTAIN NO PROVISION , AND WERE FOLLOWED BY NO RULES OF APPLICATION , FOR THE PROTECTION OF THE LEGITIMATE EXPECTATIONS OF THE PLAINTIFFS ;
( C ) THEY INFRINGE THE TREATY BECAUSE THEIR PROVISIONS DO NOT SEEK TO ATTAIN OR ARE IN CONTRADICTION WITH THE OBJECTIVES OF THE COMMON AGRICULTURAL POLICY SET OUT IN ARTICLE 39 OF THE TREATY BOTH JOINTLY AND SEVERALLY ;
( D ) THEY INFRINGE THE TREATY BECAUSE THEY EMBODY A MANIFEST DISCRIMINATION CONTRARY TO THE SECOND SUBPARAGRAPH OF ARTICLE 40 ( 3 ) OF THE TREATY ;
( E ) THE LEVY IS EXCESSIVE AND DISPROPORTIONATE AS IS SHOWN BY THE FACT THAT ITS EFFECT IS TO MAKE THE MANUFACTURE OF ISOGLUCOSE UNPROFITABLE AS COMPARED WITH SUGAR ON A MARKET ON WHICH SUCH PRODUCTS MIGHT OTHERWISE BE COMPETITIVE SO THAT IT IS THUS ELIMINATING A COMPETITOR FROM THE MARKET ;
( F ) THE COMMISSION AND THE COUNCIL HAVE MISUSED THEIR POWERS INASMUCH AS THEY HAVE SOUGHT BY MEANS OF THE LEVY TO COMPENSATE FOR THE REAL OR SUPPOSED ADVANTAGE OF ISOGLUCOSE FROM THE POINT OF VIEW OF COMPETITION ;
( G ) THE REGULATIONS ARE BASED ON AN ALTOGETHER INAPPROPRIATE AND/OR FALSE ESTIMATE OF THE COSTS OF PRODUCTION OF ISOGLUCOSE AND/OR ON AN ALTOGETHER ERRONEOUS APPRECIATION OF THE ROLE OF ISOGLUCOSE AND OF ITS POTENTIAL MARKET .
59THE FIRST QUESTION TO BE EXAMINED IS WHETHER REGULATION NO 1111/77 , IN ESTABLISHING THE PRODUCTION LEVY FOR ISOGLUCOSE , INFRINGED THE PROHIBITION ON DISCRIMINATION LAID DOWN IN THE SECOND SUBPARAGRAPH OF ARTICLE 40 ( 3 ) OF THE TREATY .
60IN THIS RESPECT INQUIRY MUST BE MADE WHETHER ISOGLUCOSE AND SUGAR ARE IN COMPARABLE SITUATIONS .
61THE SECOND RECITAL IN THE PREAMBLE TO REGULATION NO 1111/77 STATES THAT ' ' ISOGLUCOSE IS A DIRECT SUBSTITUTE FOR LIQUID SUGAR OBTAINED FROM SUGAR-BEET OR CANE ' ' AND THE SEVENTH RECITAL STATES THAT ISOGLUCOSE IS ' ' A SUBSTITUTE PRODUCT IN DIRECT COMPETITION WITH LIQUID SUGAR ' ' .
62AS THE COUNCIL HAS SUBSEQUENTLY RECOGNIZED IN THE THIRD RECITAL IN THE PREAMBLE TO REGULATION NO 1298/78 OF 6 JUNE 1978 AMENDING REGULATION NO 1111/77 ( OFFICIAL JOURNAL L 160 , P . 9 ), AS THE MARKETS IN SUGAR AND ISOGLUCOSE ARE CLOSELY LINKED AND THERE ARE STRUCTURAL SURPLUSES IN THE COMMUNITY SUGAR SECTOR , ANY COMMUNITY DECISION ON ONE OF THOSE PRODUCTS NECESSARILY AFFECTS THE OTHER .
63NEVERTHELESS IT MUST BE POINTED OUT THAT ISOGLUCOSE MANUFACTURERS AND SUGAR MANUFACTURERS ARE TREATED DIFFERENTLY AS REGARDS THE IMPOSITION OF THE PRODUCTION LEVY .
64IN FACT , IN CONTRAST TO THE PRODUCTION LEVY PROVIDED FOR IN ARTICLE 27 OF REGULATION NO 3330/74 , WHICH ONLY AFFECTS QUOTA B SUGAR , THE LEVY APPLIED BY ARTICLE 9 OF REGULATION NO 1111/77 IS APPLIED TO THE WHOLE OF ISOGLUCOSE PRODUCTION .
65WITHIN THE LIMITS OF QUOTAS A AND B SUGAR MANUFACTURERS ENJOY A GUARANTEE OF MARKETING AT THE INTERVENTION PRICE AND ARE ENTITLED TO THE BENEFIT OF THE EXPORT REFUND SYSTEM WHEREAS ISOGLUCOSE MANUFACTURERS DO NOT ENJOY ANY SIMILAR ADVANTAGES .
66EVEN WHEN ACCOUNT IS TAKEN OF THE FACT THAT IN PURSUANCE OF ARTICLE 9 ( 2 ) OF REGULATION NO 1111/77 THE AMOUNT OF THE PRODUCTION LEVY ON ISOGLUCOSE WAS LIMITED FOR THE PERIOD FROM 1 JULY 1977 TO 30 JUNE 1978 TO THE MAXIMUM RATE OF 5 UNITS OF ACCOUNT PER 100 KG , A RATE WHICH WAS MAINTAINED IN FORCE FOR THE MARKETING YEAR 1978/79 BY REGULATION NO 1298/78 , THE DIFFERENCE IN TREATMENT STILL EXISTS AS THE ISOGLUCOSE MANUFACTURES DO NOT ENJOY THE MARKETING GUARANTEES PROVIDED FOR MANUFACTURES OF NORMAL SUGAR .
67HOWEVER , IT IS STILL NECESSARY TO INQUIRE WHETHER THAT DIFFERENCE OF TREATMENT AS REGARDS THE IMPOSITION OF THE PRODUCTION LEVY IS OBJECTIVELY JUSTIFIED .
68ACCORDING TO THE COUNCIL AND THE COMMISSION ISOGLUCOSE , WITHOUT BEING SUBJECTED TO THE PRODUCTION CONSTRAINTS IMPOSED ON SUGAR , BENEFITS FROM THE HYPOTHETICAL DIFFERENCE , ESTIMATED AT 15 % , BETWEEN THE INTERVENTION PRICE FIXED AT A LEVEL WHICH TOOK ACCOUNT OF THE HIGHER PRICES APPLIED IN THE MEMBER STATES BEFORE THE SETTING UP OF THE COMMON ORGANIZATION OF THE MARKET IN SUGAR AND THE PRICES WHICH , IN THE ABSENCE OF THE QUOTA SYSTEM , WOULD HAVE HAD TO BE FIXED TO REGULATE THE PRODUCTION OF SUGAR IN THE COMMUNITY .
69IT HAS BEEN CLAIMED THAT HENCE , AS THE PRICE OF ISOGLUCOSE TENDS TO ALIGN ITSELF ON THE INTERVENTION PRICE FOR SUGAR , THE INTERVENTION SYSTEM CONFERS ON ISOGLUCOSE A COMPETITIVE ADVANTAGE IN RELATION TO SUGAR OF ROUGHLY 15 % OF THE INTERVENTION PRICE FOR THE LATTER , WHICH CORRESPONDS MORE OR LESS TO 5 UNITS OF ACCOUNT , NAMELY TO THE PROVISIONAL AMOUNT OF THE PRODUCTION LEVY FOR ISOGLUCOSE .
70THIS ARGUMENT CANNOT BE ACCEPTED .
71IN FACT , EVEN IF IT WERE ADMITTED FOR THE SAKE OF ARGUMENT THAT THE ADVANTAGE ENJOYED BY ISOGLUCOSE MANUFACTURERS AS A RESULT OF THE INTERVENTION SYSTEM FOR SUGAR COULD BE ESTIMATED AT 15 % OF THE INTERVENTION PRICE FOR SUGAR , SUCH AN ADVANTAGE APPLIES EQUALLY TO CERTAIN SUGAR MANUFACTURERS , IN PARTICULAR THOSE IN POSSESSION OF MODERN FACTORIES FAVOURABLY SITUATED .
72THE COMMISSION AND COUNCIL FURTHER CLAIM THAT THE PRODUCTION LEVY OF 5 UNITS OF ACCOUNT IMPOSED ON ISOGLUCOSE IS ESSENTIALLY COMPARABLE TO THE CHARGES BORNE BY SUGAR .
73BY WAY OF DEMONSTRATION THE COMMISSION AT THE REQUEST OF THE COURT PRODUCED A TABLE SHOWING A SERIES OF EXAMPLES BASED ON THE PRODUCTION FIGURES FOR MODERN SUGAR FACTORIES PRODUCING CONSIDERABLE QUANTITIES OF C SUGAR .
74ACCORDING TO THE COMMISSION THESE CALCULATIONS SHOW THAT SUGAR MANUFACTURERS BEAR CHARGES VARYING FROM 3.81 UNITS OF ACCOUNT TO 13.52 UNITS OF ACCOUNT PER 100 KG .
75THE COMMISSION HAS WORKED OUT THE ABOVE-MENTIONED CHARGES FOR EACH FACTORY BY A CALCULATION BASED ON THE TOTAL PRODUCTION OF A , B AND C SUGAR FOR THE SUGAR MARKETING YEAR 1977/78 ; ITS HAS SUBSEQUENTLY ESTIMATED THE VALUE OF THAT PRODUCTION BY ATTRIBUTING TO A SUGAR THE INTERVENTION PRICE , TO B SUGAR THE INTERVENTION PRICE LESS THE LEVY INVOLVED AND TO C SUGAR AN ESTIMATE OF THE WORLD PRICE .
76BY DIVIDING THE TOTAL VALUE THUS OBTAINED BY TOTAL PRODUCTION THE COMMISSION REACHES AN AVERAGE PRICE EXPRESSED IN UNITS OF ACCOUNT PER 100 KG .
77ON THE BASIS OF THESE CALCULATIONS THE AVERAGE CHARGE BORNE BY EACH 100 KG OF SUGAR PRODUCED IS THE DIFFERENCE BETWEEN THE SAID AVERAGE PRICE AND THE INTERVENTION PRICE FOR THE SAME QUANTITY .
78HOWEVER , IT IS ACKNOWLEDGED THAT UNDER THE COMMON ORGANIZATION OF THE MARKET FOR SUGAR ROUGHLY 60 % OF THE AVERAGE CHARGE INVOLVED IN THE PRODUCTION LEVY IS BORNE BY SUGAR-BEET GROWERS FOR WHOM THE MINIMUM PRICE OF BEET IS SUBSTANTIALLY REDUCED FOR BEET USED FOR B AND C SUGAR , THAT IS TO SAY , FOR SUGAR PRODUCED OUTSIDE THE BASIC QUOTA .
79BY OMITTING TO TAKE THIS FACTOR INTO CONSIDERATION IN ITS CALCULATIONS , THE COMMISSION HAS CONSIDERABLY OVERESTIMATED THE CHARGES BORNE BY SUGAR MANUFACTURERS .
80IT IS ALSO IMPORTANT TO NOTE THAT IT EMERGES FROM THE COMMISSION ' S CALCULATIONS THAT EACH INCREASE IN THE TOTAL PRODUCTION OF SUGAR OUTSIDE THE BASIC QUOTA HAS THE EFFECT OF INCREASING THE AVERAGE CHARGE TO BE BORNE BY THE MANUFACTURER SO THAT THE LATTER IS IN A POSITION TO REDUCE THE AMOUNT OF THE SAID CHARGE BY LIMITING HIS PRODUCTION WHEREAS FOR THE ISOGLUCOSE MANUFACTURER A LIMITATION ON PRODUCTION REMAINS WITHOUT ANY EFFECT AS REGARDS THE AMOUNT PER UNIT OF WEIGHT OF THE PRODUCTION LEVY BROUGHT INTO FORCE BY REGULATION NO 1111/77 .
81MOREOVER THE COUNCIL AND THE COMMISSION EMPHASIZE THE PRACTICAL DIFFICULTIES WHICH CERTAIN ALTERNATIVE SOLUTIONS WOULD HAVE PRESENTED , IN PARTICULAR THE ESTABLISHMENT OF A QUOTA SYSTEM FOR ISOGLUCOSE , REGARD BEING HAD TO THE FACT THAT THE LATTER IS A PRODUCT NEWLY ARRIVED ON THE COMMUNITY MARKET AND THAT ITS PRODUCTION IS IN THE PROCESS OF INCREASING RAPIDLY .
82HOWEVER , INCONVENIENCES OF THE TYPE ALLEGED CANNOT JUSTIFY THE IMPOSITION OF A CHARGE WHICH IS MANIFESTLY UNEQUAL .
83ACCORDINGLY THE PROVISIONS OF REGULATION NO 1111/77 ESTABLISHING THE PRODUCTION LEVY SYSTEM FOR ISOGLUCOSE OFFEND AGAINST THE GENERAL PRINCIPLE OF EQUALITY OF WHICH THE PROHIBITION ON DISCRIMINATION SET OUT IN ARTICLE 40 ( 3 ) OF THE TREATY IS A SPECIFIC EXPRESSION .
84THE ANSWER MUST THEREFORE BE THAT REGULATION NO 1111/77 IS INVALID TO THE EXTENT TO WHICH ARTICLES 8 AND 9 THEREOF IMPOSE A PRODUCTION LEVY ON ISOGLUCOSE OF 5 UNITS OF ACCOUNT PER 100 KG OF DRY MATTER FOR THE PERIOD CORRESPONDING TO THE SUGAR MARKETING YEAR 1977/78 .
85THERE IS THEREFORE NO NEED TO EXAMINE THE OTHER GROUNDS PUT FORWARD BY THE PLAINTIFFS OR TO GIVE A RULING ON THE VALIDITY OF REGULATION NO 1110/77 .
86HOWEVER , THE ABOVE ANSWER WILL LEAVE THE COUNCIL FREE TO TAKE ANY NECESSARY MEASURES COMPATIBLE WITH COMMUNITY LAW FOR ENSURING THE PROPER FUNCTIONING OF THE MARKET IN SWEETENERS .
COSTS
87THE COSTS INCURRED BY THE COUNCIL AND THE COMMISSION OF THE EUROPEAN COMMUNITIES , WHICH HAVE SUBMITTED OBSERVATIONS TO THE COURT , ARE NOT RECOVERABLE .
88AS THESE PROCEEDINGS ARE , IN SO FAR AS THE PARTIES TO THE MAIN ACTION ARE CONCERNED , IN THE NATURE OF A STEP IN THE ACTION PENDING BEFORE THE NATIONAL COURT , THE DECISION ON COSTS IS A MATTER FOR THAT COURT .
ON THOSE GROUNDS ,
THE COURT
IN ANSWER TO THE QUESTIONS REFERRED TO IT BY THE HIGH COURT OF JUSTICE , QUEEN ' S BENCH DIVISION , COMMERCIAL COURT , BY ORDERS OF 29 JULY AND 8 NOVEMBER 1977 , HEREBY RULES :
1 . CONSIDERATION OF THE QUESTIONS RAISED HAS DISCLOSED NO FACTOR OF SUCH A KIND AS TO AFFECT THE VALIDITY OF COUNCIL REGULATION NO 1862/76 OF 27 JULY 1976 .
2 . COUNCIL REGULATION NO 1111/77 OF 17 MAY 1977 IS INVALID TO THE EXTENT TO WHICH ARTICLES 8 AND 9 THEREOF IMPOSE A PRODUCTION LEVY ON ISOGLUCOSE OF 5 UNITS OF ACCOUNT PER 100 KG OF DRY MATTER FOR THE PERIOD CORRESPONDING TO THE SUGAR MARKETING YEAR 1977/78 .
