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

JUDGMENT OF THE COURT (Second Chamber)
27 January 2005 (1)

applicant,

v

defendant,

intervener,

THE COURT (Second Chamber),

after hearing the Opinion of the Advocate General at the sitting on 28 October 2004,

gives the following

Judgment

1. By this application the Commission of the European Communities asks the Court to declare that, by failing to adopt the measures necessary to give priority to the processing of waste oils by regeneration where the technical, economic and organisational constraints so allow, the Portuguese Republic has failed to fulfil its obligations under Article 3(1) of Council Directive 75/439/EEC of 16 June 1975 on the disposal of waste oils (OJ 1975 L 194, p. 23), as amended by Council Directive 87/101/EEC of 22 December 1986 (OJ 1987 L 42, p. 43), (-�the Directive-�).

Legal background
Community legislation
2. The aim of the Directive is to protect the environment against the harmful effects caused by the discharge and treatment of waste oils. Article 3 provides:
-�1. Where technical, economic and organisational constraints so allow, Member States shall take the measures necessary to give priority to the processing of waste oils by regeneration.
2. Where waste oils are not regenerated, on account of the constraints mentioned in paragraph 1 above, Member States shall take the measures necessary to ensure that any combustion of waste oils is carried out under environmentally acceptable conditions, in accordance with the provisions of this Directive, provided that such combustion is technically, economically and organisationally feasible.
3. Where waste oils are neither regenerated nor burned, on account of the constraints mentioned in paragraphs 1 and 2, Member States shall take the measures necessary to ensure their safe destruction or their controlled storage or tipping.-�
3. In accordance with Article 2 of Directive 87/101, the Member States were to take the measures necessary to comply with their obligations under that directive with effect from 1 January 1990.
National legislation
4. The national legislation on the management of waste oils consists of the following instruments:
- Legislative Decree No 88/91 of 23 February 1991 regulating activities relating to waste oils;
- Ministerial Decree No 240/92 of 25 March 1992 approving the regulation on the grant of licences for the collection, storage, preliminary treatment, regeneration, recovery, combustion and incineration of waste oils;
- Ministerial Decree No 1028/92 of 5 November 1992 on safety and identification standards for the transport of waste oils;
- Joint Order of the Ministries of Industry and the Environment of 18 May 1993 on the application of the regulation on the grant of licences for the management of waste oils.
5. With a view to amending that legislation, on 19 March 2001 the Portuguese authorities approved a document entitled -�New National Waste-Oil Management Strategy-�.

Pre-litigation procedure
6. On 18 July 2000 the Commission requested the Portuguese authorities to forward to it, inter alia, data concerning the quantities of waste oils regenerated in the years 1995 to 1997.
7. On 4 October 2000 the Portuguese authorities replied that the processing of waste oil by regeneration had not yet been implemented, but that a study of the technical, economic and financial feasibility of setting up regenerating units for oils was underway. On 7 May 2002 the Portuguese authorities sent a report to the Commission on the application of the Directive in the years 1998 to 2000 together with the document -�New National Waste-Oil Management Strategy-�.
8. On 11 April 2001 the Commission sent a letter of formal notice to the Portuguese Republic, in which it pointed out that the latter had not adopted the measures necessary to give priority to the processing of waste oils by regeneration although technical, economic and organisational constraints so allowed, thereby failing to fulfil its obligations under Article 3(1) of the Directive.
9. On 18 October 2001, the Portuguese authorities replied that a law was being drafted that would give priority to the regeneration of waste oils and that the economic operators concerned were prepared, together, to construct a regeneration plant.
10. Since it was not satisfied with that response, on 24 October 2001 the Commission sent a reasoned opinion to the Portuguese Republic in which it restated its view that the latter had failed to adopt the measures necessary to give priority to the processing of waste oils by regeneration although technical, economic and organisational constraints did so allow. On 20 December 2001 the Commission sent a supplementary reasoned opinion to the Portuguese Republic in which it stated that, in spite of the explanations given, the failure to fulfil the obligations laid down in Article 3(1) of the Directive persisted.
11. On 7 March 2002 the Portuguese authorities replied to those reasoned opinions, pointing out that there were still technical, economic and organisational constraints impeding priority being given to regeneration in the management of waste oils.
12. In that reply the Portuguese authorities further explained that the national legislation on waste oils had not led immediately to the construction of a regeneration plant on its national territory because Council Regulation (EEC) No 259/93 of 1 February 1993 on the supervision and control of shipments of waste within, into and out of the European Community (OJ 1993 L 30, p. 1) did not allow the competent authorities to prohibit the export of waste for energy recovery.
13. Since the Commission took the view that the priority to be given to the processing of waste oils by regeneration had not yet been established in Portugal, it decided to bring the present action.
14. By order of the President of the Court of 11 September 2003, the Republic of Finland was given leave to intervene in support of the forms of order sought by the Portuguese Republic.

The action
Arguments of the parties
15. The Commission submits that none of the laws and regulations cited by the Portuguese authorities gives priority to the processing of waste oils by regeneration.
16. As regards the Portuguese Republic-�s argument relating to Regulation No 259/93, the Commission observes that its provisions do allow the competent authorities to prohibit the export of waste oil for energy recovery. The Portuguese authorities could have been able to raise reasoned objections to the shipment of waste oils for energy recovery in other Member States long ago if they had taken the measures necessary, within the period prescribed by the Directive, to ensure that priority was given to the processing of waste oils by regeneration in Portugal, as provided for in Article 3(1) of the Directive.
17. The Commission adds that if Portuguese legislation had established such priority, objections to export operations could have been founded on the fact that the shipments of waste oils would result in their combustion. The Community legislature has provided that the competent authorities of dispatch may raise reasoned objections to the shipment of waste in particular to other Member States on the basis of one of the reasons set out in Article 7(4)(a) of Regulation No 259/93. It concludes that that argument cannot be relied on as an obstacle to establishing that priority be given to regeneration as required by the Directive.
18. The Commission states that, 12 years after the expiry of the period for implementation prescribed by Article 2 of Directive 87/101, the Portuguese authorities have still not taken the measures necessary to ensure that priority is in fact given to the processing of waste oils by regeneration. In this case legal and practical deficiencies, in particular as regards the supervision of the destination of waste oils and their collection in Portugal, have contributed significantly to the absence of the requisite conditions for giving priority to such processing, and have prevented, in particular, the setting up of at least one regeneration unit for such oils in the territory of that Member State.
19. Finally, the Commission takes the view that the publication of the document entitled -�New National Waste-Oil Management Strategy-� is irrelevant. The same is true of the other initiatives announced by the Portuguese authorities.
20. The Portuguese Government submits that the absence of legislation is not sufficient to prove infringement of Article 3(1) of the Directive, because, theoretically, the objective referred to in that provision does not necessarily have to be enacted in concrete terms in national legislation. The national legislation defines the conditions governing the regeneration of waste oils in terms which do not jeopardise the objectives of the Directive.
21. The Portuguese Government contends that the quantities of waste oils collected, particularly waste oils of good quality, do not reach the minimum threshold of economic viability. Furthermore, it is impossible to prohibit the export of waste oils for energy recovery, which discourages potential investors from investing in a regeneration unit on national territory because they have no guarantee that the waste oils collected will be sent to that plant.
22. As regards the question of the export of waste oils, the Portuguese Government submits that the fact that it is possible for the competent authorities to intervene pursuant to Article 7(4)(a) of Regulation No 259/93 does not constitute an effective means of preventing the export of waste oils for energy recovery, even if there were adequate regeneration capacity in Portugal. That provision does not enable Member States to justify restrictions on exports of waste oils for energy recovery as measures to protect their national waste oil regeneration industry.
23. The Portuguese Government points out that, apart from financial, technical and legislative constraints, the size of the Portuguese market gives an indication of the difficulties encountered in implementing the regeneration of waste oils, given the minimum reference thresholds for ensuring the viability of such a process. It states that it has really endeavoured to minimise the economic, technical and organisational constraints that it faces in order to give priority to processing by regeneration of this type of waste.
24. The Portuguese Government states that the pivotal issue for a regeneration plant is the cost of supplying the waste oils, which depends mainly on the local economy, the market price of crude oil and the regeneration technology used. Unless there are captive markets for the base oils resulting from regeneration, large plants are better able to cope with the considerable variations in the price of crude oil and retain sufficient long-'term economic viability.
25. The Portuguese Government submits, in that regard, that although technical, economic and organisational constraints have discouraged operators in the sector from setting up regeneration units for waste oils, the national authorities are determined to put in place a system of management of this waste which does indeed give priority to regeneration.
26. The Finnish Government takes the view, in its intervention in support of the forms of order sought by the Portuguese Republic, that, when the economic feasibility and viability of regeneration is being assessed, it is necessary to take into account, in particular, the quantity of waste oil produced, transport distances, production costs and market conditions. Consequently, the conditions as regards regeneration must be considered on a case-'by-'case basis in the Member State concerned. The market situation is one of the factors influencing conditions as regards regeneration.
27. In that regard, the Finnish Government submits that the price of base oil has varied significantly. Such price variation increases the risks inherent in investments in the regeneration of waste oils sector. That risk is increased by a downward trend in the consumption of lubricants, resulting from the fact that nowadays synthetic lubricants are used, which are of better quality.
28. The Finnish Government adds that if national legislation introduced a mandatory requirement for regeneration and there was no regeneration plant in the Member State concerned, waste oils would have to be transported to another Member State in order to be regenerated there. If that were the case, neither the excessive costs of transport for the exporter nor the fact that such shipment might be unreasonable on account of its effects on the environment would be taken into consideration.
Findings of the Court
29. It must be recalled, as a preliminary point, that, as the Court held in its judgment in Case C-102/97 Commission v Germany [1999] ECR I-5051, paragraph 35, one of the primary objectives of the Directive was to give priority to the processing of waste oils by regeneration. That objective, expressed in the second recital in the preamble to Directive 87/101, is justified by the fact that regeneration is the most rational way of re-'using waste oils in view of the energy savings that can thereby be achieved.
30. As regards the Commission-�s complaint of failure to comply with Article 3(1) of the Directive, it must be stated at the outset that the existing national legislation contains no provision that states, as prescribed by Article 3(1), that priority is to be given to the processing of waste oils by regeneration.
31. It must also be noted that the Portuguese Republic has itself acknowledged that the competent authorities must take tangible measures to establish such prioritisation in provisions having a binding legal character. The Portuguese Government has stated, in that connection, that it is necessary to amend the national legislation on the matter in order to establish the requisite conditions for establishing such a priority and that it is with that aim that the document entitled -�New National Waste-Oil Management Strategy-� was drawn up.
32. As the Court held in paragraph 25 of its judgment in Case C-424/02 Commission v United Kingdom [2004] ECR I-0000, although it is acceptable that Member States first carry out studies and draw up reports in order to determine how waste oils should be disposed of, those preparatory steps must nevertheless be followed by tangible measures aimed at giving priority to regeneration, in order to comply with the obligation laid down by Article 3(1) of the Directive.
33. As to the argument that, having regard to the provisions of Article 7(4) of Regulation No 259/93, it is difficult to ensure the viability of waste-'oil regeneration plants in Portugal, it need only be stated that, under those provisions, the competent authorities of the Member States are empowered to raise objections to the shipment of waste, including waste oils, for recovery in another Member State.
34. As the Advocate General rightly pointed out in point 52 of his Opinion, if the Portuguese Republic had established, as Article 3(1) of the Directive required, priority for the regeneration of waste oils on its territory, the competent authorities could then have raised objections against a shipment of such waste to other Member States.
35. As to the argument relied on by the Portuguese Republic that setting up regeneration plants on its territory was not viable and that, in those circumstances and by reason of the principle of proportionality, the obligations of the Member States concerned should be modified in accordance with actual circumstances, it must be recalled that, as the Court held in paragraphs 35 and 43 of its judgment in Commission v Germany, one of the primary objectives of the Directive was to give priority to the processing of waste oils by regeneration. Therefore, to consider that the technical, economic and organisational circumstances obtaining in a Member State automatically constituted constraints making it impossible to adopt the measures provided for in Article 3(1) of the Directive would deprive that provision of all practical effect, since the obligation imposed on Member States would be limited by maintenance of the status quo, with the result that there would be no genuine obligation to take the measures necessary to give priority treatment to the processing of waste oils by regeneration.
36. Furthermore, as regards that priority, it must be pointed out, as the Court stated in paragraphs 38 and 39 of the judgment in Commission v Germany, that the reference to -�technical, economic and organisational constraints-� in Article 3(1) of the Directive forms part of a provision giving general expression to the obligation imposed on Member States and that the Community legislature did not thereby intend to provide limited exceptions to a rule having general application, but to define the scope and content of a positive obligation to give priority to the processing of waste oils by regeneration.
37. It follows from all of the foregoing that the Commission-�s action must be regarded as well founded.
38. It must therefore be held that, by failing to adopt the measures necessary to give priority to the processing of waste oils by regeneration where the technical, economic and organisational constraints so allow, the Portuguese Republic has failed to fulfil its obligations under Article 3(1) of the Directive.

Costs
39. Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party-�s pleadings. Since the Commission asked that the Portuguese Republic be ordered to pay the costs and the latter has been unsuccessful in its defence, it must be ordered to pay the costs. In accordance with Article 69(4), the Republic of Finland is to bear its own costs.




On those grounds, the Court (Second Chamber) hereby:
1. Declares that, by failing to adopt the measures necessary to give priority to the processing of waste oils by regeneration where the technical, economic and organisational constraints so allow, the Portuguese Republic has failed to fulfil its obligations under Article 3(1) of Council Directive 75/439/EEC of 16 June 1975 on the disposal of waste oils, as amended by Council Directive 87/101/EEC of 22 December 1986;
2. Orders the Portuguese Republic to pay the costs;
3. Orders the Republic of Finland to bear its own costs.

[Signatures]

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1 - Language of the case: Portuguese.