Court of Justice of the European Communities (including Court of First Instance Decisions)

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1 . Free movement of goods - Trade with non-member countries - Inward processing arrangements - Triangular operations authorized by the national authorities after consultation with the Commission - Failure to levy intra-Community monetary compensatory amounts - Subsequent challenge by the Commission on the ground that traders had obtained an unjustified advantage - Not permissible
( Commission Directive 75/349, Art . 4 )
2 . Community law - Principles - Legal certainty - Rules imposing charges - Requirement of clarity and precision

1 . Having laid down, at the request of the national authorities dealing with an application by traders for the benefit of inward processing arrangements for triangular operations, the procedure to be followed for the application of Directive 75/349 to such triangular operations, the Commission must have taken the view that those operations could be authorized under that procedure without involving a notional trade in goods between the Member States concerned giving rise to the levying of intra-Community monetary compensatory amounts . Accordingly, the Commission cannot subsequently complain of those Member States' failure to foresee the possibility of levying such compensatory amounts and to consider that the benefit of inward processing arrangements had to be refused on account of the unjustified advantage, within the meaning of Article 4 of the aforesaid directive, gained by the traders concerned from non-payment of such monetary compensatory amounts .
2 . The principle of legal certainty requires that rules imposing charges on the taxpayer must be clear and precise so that he may know without ambiguity what are his rights and obligations and may take steps accordingly .

In Joined Cases 92 and 93/87
Commission of the European Communities, represented by J . Forman and J . Sack, members of its Legal Department, acting as Agents, with an address for service in Luxembourg at the office of Georgios Kremlis, a member of the Commission' s Legal Department, Wagner Centre, C 254, Kirchberg,
applicant,
v
French Republic ( Case 92/87 ), represented by E . Belliard, Deputy Director of the Department of Economic Law at the Ministry of Foreign Affairs, and by C . Chavance, Principal Attaché for central administration at the same Ministry, acting as Agents, with an address for service in Luxembourg at the French Embassy, 9 boulevard du Prince Henri,
and
United Kingdom of Great Britain and Northern Ireland ( Case 93/87 ), represented by S . J . Hay, acting as Agent, assisted by D . Wyatt, barrister-at-law, with an address for service in Luxembourg at the British Embassy, 14 boulevard Roosevelt,
defendants,
APPLICATION for a declaration that the French Republic and the United Kingdom have failed to fulfil their obligations under the EEC Treaty by not recovering or making available to the Commission, as own resources, monetary compensatory amounts payable under specific inward processing arrangement,
THE COURT
composed of : O . Due, President, R . Joliet and T . F . O' Higgins ( Presidents of Chambers ), Sir Gordon Slynn, G . F . Mancini, F . A . Schockweiler, J . C . Moitinho de Almeida, G . C . Rodríguez Iglesias and M . Zuleeg, Judges,
Advocate General : W . Van Gerven
Registrar : J . A . Pompe, Deputy Registrar
having regard to the Report for the Hearing and further to the hearing on 13 October 1988,
after hearing the Opinion of the Advocate General delivered at the sitting on 6 December 1988,
gives the following
Judgment

1 By applications lodged at the Court Registry on 25 March 1987, the Commission of the European Communities brought two actions under Article 169 of the EEC Treaty for a declaration that the French Republic ( Case 92/87 ) and the United Kingdom ( Case 93/87 ) have failed to fulfil their obligations under the EEC Treaty by not recovering or making available to the Commission, as own resources, monetary compensatory amounts non-payment of which in connection with a triangular inward processing operation allegedly gave rise to an unjustified advantage for the traders concerned in regard to relief from Community charges .
2 The unjustified advantage allegedly resulted from the joint venture set up by the Compagnie française commerciale et financière ( hereinafter referred to as "CFCF "), whose registered office is in Paris, and a British company, Rank Hovis Ltd, in order to take advantage in 1981 of the Community provisions applicable at the time to inward processing arrangements, with a view to obtaining the authorization of the national authorities to import into the United Kingdom free of import levy common wheat from Canada and to export from France to non-member countries the corresponding quantity of flour without the benefit of export refunds .
3 Council Directive 69/73/EEC of 4 March 1969 on the harmonization of provisions laid down by law, regulation or administrative action in respect of inward processing ( Official Journal, English Special Edition 1969 ( I ), p . 75 ) empowers the competent authorities of the Member States to authorize the importation into the Community of goods from non-member countries free of customs duties, charges having equivalent effect or agricultural levies, where such goods are intended for re-exportation in the form of compensating products after being processed in the Community .
4 Article 24 of that directive provides for a system of equivalent compensation according to which, where the circumstances so warrant, the competent authorities may treat as products compensating for imported goods products derived from processing of goods of the same kind and quality and having the same technical characteristics as those of the imported goods .
5 Moreover, Article 25 of the directive provides that, where equivalent compensation is authorized, the products treated as compensating products may be exported prior to the importation of goods covered by inward processing arrangements . However, Article 11 of Commission Directive 75/349/EEC of 26 May 1975 on detailed rules concerning equivalent compensation and prior exportation under inward processing arrangements ( Official Journal 1975, L 156, p . 25 ) provides that, in the event of prior exportation, "importation of import goods may be carried out only by the holder of the authorization of prior exportation, or on his behalf ".
6 Finally, Article 4 of Directive 75/349 provides that :
"The competent authorities shall refuse the benefit of equivalent compensation or prior exportation when the use of these would lead to an unjustified advantage in regard to relief from customs duties, charges having equivalent effect, agricultural levies and other charges laid down within the framework of the common agricultural policy, or of a specific system applicable under Article 235 of the Treaty to certain goods which result from processing of agricultural products ".
7 The particularity of the inward processing operation contemplated by CFCF and Rank Hovis was its triangular nature, since the exportation and the importation were to be carried out in two different Member States by two different undertakings . The question therefore arose of how to comply with the provisions of Article 11 of Directive 75/349 . In those circumstances the competent French and United Kingdom authorities consulted the Commission in order to ascertain the procedure to be followed .
8 The procedure applicable to the prior exportation of compensating products under inward processing arrangements from one Member State and to the importation of import goods into another Member State was laid down by the Commission at a meeting held in Brussels with the national authorities on 12 June 1981, and subsequently confirmed by Document SUD/833/81 which was forwarded to the French and United Kingdom authorities . With regard to Article 11, that document stated that :
"This provision is designed to establish a link between the importer and the exporter/operator . If the operator and the importer are two different persons, whether located in a single Member State or in different Member States, such a link can be formed by setting up a temporary association ( a company constituted under civil law ) to act as holder of the inward processing relief authorization .
The procedure for such cases could be that proposed in the annex to this document .
These rules could be incorporated in a revised version of Directive 75/349/EEC ."
The document also laid down other procedural rules that had to be observed .
9 Accordingly, CFCF and Rank Hovis set up a consortium under French law, a groupement d' intérêt économique, Minoran, which on 21 October 1981 was authorized by the French authorities, with the consent of the United Kingdom authorities, to carry out the proposed operation . Rank Hovis imported Canadian common wheat into the United Kingdom on behalf of Minoran free of levies and CFCF exported flour from France to non-member countries without the benefit of refunds .
10 A second similar authorization granted to Minoran on 9 August 1982 was cancelled by the French authorities on 30 September 1982 after the Commission had objected by telex message of 22 September 1982 that such authorizations gave rise to an unjustified advantage within the meaning of Article 4 of Directive 75/349, inasmuch as the triangular operations in question were not subject to monetary compensatory amounts .
11 The Commission subsequently requested each of the two defendants, on the basis of Article 2(1 ) of Council Regulation ( EEC ) No 1697/79 of 24 July 1979 on the post-clearance recovery of import duties or export duties which have not been required of the person liable for payment on goods entered for a customs procedure involving the obligation to pay such duties ( Official Journal 1979, L 197, p . 1 ), to recover from the undertaking within its jurisdiction the monetary compensatory amounts which, according to the Commission, should have been paid in connection with the operation which had been carried out . Since the defendants denied that any customs debt had arisen or, alternatively, that there was any obligation to recover such a debt, the Commission set in motion against each defendant the procedure under Article 169 of the EEC Treaty .
12 Reference is made to the Report for the Hearing for a fuller account of the relevant legislation, the background to the dispute, the procedure, and the submissions and arguments of the parties, which are mentioned hereinafter only in so far as is necessary for the reasoning of the Court .
13 In support of its two actions, the Commission submits in substance that the authorization to carry out the triangular operation gave rise to an unjustified advantage within the meaning of Article 4 of Directive 75/349, inasmuch as that advantage did not result from the normal application of inward processing arrangements . That operation enabled the traders to avoid payment of the negative French monetary compensatory amounts ( Case 92/87 ) and the positive United Kingdom monetary compensatory amounts ( Case 93/87 ) on the transfer of the wheat from France to the United Kingdom which would have taken place if there had been no triangular operation . Accordingly, the authorization to carry out that operation was invalid .
14 The Commission acknowledges that the unjustified advantage cannot as such be the subject of an action for recovery because no commercial transaction took place between the two Member States . However, as a result of the invalidity of the authorization, there is an obligation to recover the charges normally laid down for the importation and exportation of agricultural products, which therefore include the extra-Community monetary compensatory amounts applicable to the exportation of French flour to non-member countries ( Case 92/87 ) and to the importation of Canadian wheat into the United Kingdom ( Case 93/87 ). On grounds of fairness, however, the Commission seeks only the post-clearance recovery of the extra-Community monetary compensatory amounts .
15 Finally, the Commission refuses to allow recourse to Article 5(2 ) of Regulation ( EEC ) No 1697/79, which permits the competent authorities to refrain from taking action for the post-clearance recovery of duties from a debtor acting in good faith, on the ground that the error made by the competent authorities could reasonably have been detected by the two undertakings concerned .
16 The defendants raise the objection, in particular, that the assessment of the concept of an unjustified advantage is a particularly delicate matter since the very nature of inward processing arrangements is such as to enable traders to derive certain advantages from the differences between the amount of the levies and the amount of the refunds . In addition, the Commission' s argument would lead to the levying of duties without a clear and precise legal basis since the rules applicable at the time, in contrast to the provisions which have since been adopted, did not lay down the procedures for applying monetary compensatory amounts in connection with triangular operations . Finally, the fact that after it had been consulted the Commission did not point out that such operations could not be authorized in so far as monetary compensatory amounts were applicable contradicts the argument that the error of law inherent in the approval of the triangular operation should have been detected by the traders .
17 For the actions to succeed, the applicant must demonstrate that, at the date on which the authorization to carry out the triangular operation was granted, the defendants should have realized that the operation involved a notional trade in wheat from France to the United Kingdom giving rise to the levying of intra-Community monetary compensatory amounts, non-payment of which constituted an unjustified advantage within the meaning of Article 4 of Directive 75/349 inasmuch as it did not result from the normal application of inward processing arrangements .
18 It must be borne in mind that in their joint request CFCF and Rank Hovis sought to obtain the benefit of inward processing arrangements involving relief from import and export duties in a situation in which one of the two undertakings was to effect the prior exportation of the compensating products from one Member State whilst the other was to effect the importation of the import goods into another Member State .
19 Having laid down in Document SUD/833/81, at the request of the French and United Kingdom authorities, the procedure to be followed for the application of the provisions of Directive 75/349 to such triangular operations, the Commission must have taken the view that those operations could be authorized under that procedure .
20 However, the Commission would have been unable to adopt that position if triangular operations should have been considered, as it now contends, to involve a notional trade in goods between the Member States concerned giving rise to the levying of intra-Community monetary compensatory amounts, non-payment of which constitutes an unjustified advantage not resulting from the normal application of inward processing arrangements .
21 It follows that, since the Commission did not envisage, when it was consulted by the national authorities, the possibility that monetary compensatory amounts might be applicable, it cannot complain of the defendants' failure to foresee that possibility .
22 Furthermore, it must be pointed out that, according to the case-law of the Court ( see the judgment of 9 July 1981 in Case 169/80 Administration des douanes v Gondrand frères (( 1981 )) ECR 1931 ), the principle of legal certainty requires that rules imposing charges on the taxpayer be clear and precise so that he may know without ambiguity what are his rights and obligations and may take steps accordingly .
23 At the time when the Commission was consulted by the French and United Kingdom authorities, and then when the inward processing authorization at issue was granted, those authorities did not have available to them any clear and precise rules for requiring payment of intra-Community monetary compensatory amounts in respect of the notional trade in wheat arising from the triangular operation in question between the two Member States concerned .
24 It was only long after the authorization at issue was granted that it was expressly provided in Article 37 of Council Regulation ( EEC ) No 3677/86 of 24 November 1986 laying down provisions for the implementation of Regulation ( EEC ) No 1999/85 on inward processing relief arrangements ( Official Journal 1986, L 351, p . 1 ) that, in the context of triangular inward processing traffic, monetary compensatory amounts are to apply in the same way as if the import goods in question had been sent by the exporter of the compensating products from the exporting Member State to the importing Member State .
25 In those circumstances, the Commission has failed to demonstrate that the defendants should have realized at the time that the proposed triangular operation involved a notional trade in wheat from France to the United Kingdom, and consequently the levying of intra-Community monetary compensatory amounts, and should therefore have foreseen that the authorization sought had to be refused on the ground that, by avoiding payment of those monetary compensatory amounts, the traders concerned would gain an unjustified advantage .
26 Consequently, the fact that the defendants did not recover the monetary compensatory amounts in question or make them available to the Commission as own resources did not constitute a failure on the part of the defendants to fulfil their obligations .
27 It follows from the foregoing that it is unnecessary to consider whether the defendants can, in this case, rely on Article 5(2 ) of Regulation No 1697/79 which permits the competent authorities to refrain from taking action for the post-clearance recovery of duties from debtors acting in good faith .
28 The Commission' s applications must therefore be dismissed .

Costs
29 Under Article 69(2 ) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been asked for in the successful party' s pleading .
30 As the applicant has been unsuccessful in its action, it must be ordered to pay the costs .
31 Since the United Kingdom, but not the French Republic, has asked for costs in its pleading in accordance with the aforesaid provision, that order must be limited to the costs incurred by the United Kingdom .

On those grounds,
THE COURT
hereby :
( 1 ) Dismisses the applications;
( 2 ) Orders the Commission to pay the costs of the United Kingdom;
( 3 ) Orders the French Republic to bear its own costs .