JUDGMENT OF 18. 6. 1975 - CASE 94/74

2. As from 1 January 1970, the date ofexpiration of the transitional period,Article 13 (2) has, by its very nature,produced direct effects in the legalrelations between the Member States

and those subject to their jurisdiction.3. A due imposed by a Member State has

not the character of a charge havingan effect equivalent to a customs dutyby reason solely of the fact that it isutilized for the purpose of financing asystem of aid which is recognized asincompatible with the Treaty.

In Case 94/74

Reference to the Court under Article 177 of the EEC Treaty by the Pretore ofAbbiategrasso (Italy) for a preliminary ruling in the action pending before thatcourt between

INDUSTRIA GOMMA ARTICOLI VARI, IGAV, a limited company, having itsregistered office in Abbiategrasso (Milan),

and

ENTE NAZIONALE PER LA CELLULOSA E PER LA CARTA, ENCC, (National Board forCellulose and Paper) having its registered office in Rome, on theinterpretation of Articles 13 (2), 85 and 86 of the EEC Treaty in relation to adomestic charge of a fiscal nature levied on certain paper and cardboard andon cellulose,

THE COURT

composed of: R. Lecourt, President, J. Mertens de Wilmars and A. J.Mackenzie Stuart, Presidents of Chambers, A. M. Donner, R. Monaco, P.Pescatore (Rapporteur), H. Kutscher, M. Sørensen and A. O'Keeffe, Judges,Advocate-General: A. Trabucchi

Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts

The facts, the procedure and theobservations submitted under Article 20of the Protocol on the Statute of the

Court of Justice of the EEC may besummarized as follows:

700

IGAV v ENCC

I — Facts and written procedure

Industria Gomma Articoli Vari (IGAV),having its registered office inAbbiategrasso (Milan), imported from1970 to 1973 paper products forprocessing from Member States of theCommunity in particular.

On 17 May 1974 a claim was madeagainst IGAV by Ente Nationale per laCellulosa er per la Carta (ENCC) forpayment of the sum of 23 334 538 lire,due as at 16 October 1973 by way of levyon paper and cardboard under theprovisions of law No 868 of 13 June1940 (Gazzetta Ufficiale No 170 of 22July 1940) and Law No 168 of 28 March1956 (Gazzetta Ufficiale No 79 of 3 April1956).

On 14 June 1974 IGAV paid to ENCCby bank transfer the sum of 2 047 031lire in respect of duties relating toimports from third countries; on theother hand, it disputed the correctness ofthe ENCC's claim to be entitled tocollect the balance of 21 287 507 lire

relating to imports from Member States.

On the same date, IGAV, applyingArticle 700 of the Italian Code of Civil

Procedure, requested the Pretura ofAbbiategrasso to find by way ofemergency measure that the duty inquestion was incompatible with Article13 of the EEC Treaty as interpreted bythe Court of Justice, in particular in itsjudgment of 19 June 1973 in Case 77/72(Carmine Capolongo v Azienda AgricolaMaya, a request for a preliminary rulingby the Pretore di Conegliano, [1973] ECR611).

By order of 28 June 1974 the Pretore ofAbbiategrasso granted this applicationand ordered the ENCC not to enter thesum of Lit. 21 287 507 in the list of

duties as being due from IGAV or, in theevent of such entry having already beenmade, not to remit the same to theIntendenza di Finanza of Milan.

At the hearing on 8 November 1974, the

ENCC requested the Pretore ofAbbiategrasso that his order for aninjunction of 28 June 1974 should stand.

By order of 14 November 1974 thePretore of Abbiategrasso decided to staythe proceedings and to refer thefollowing preliminary questions to theCourt under Article 177 of the EEC

Treaty:

Taking into account the principle of thefree movement of goods embodied in theEEC Treaty, the object of which is toenable the various national markets to be

merged into a single market within theEuropean Community in such a way asto exclude, as between the producers of agiven product, differences of treatmenton the basis of differences in the originof the product, and, in the light of thejudgment of the Court delivered on 19June 1973 in Case 77/72 and also ofArticles 85 and 86 of the Treaty:

I. Does a duty which must be paid oncertain products, such as paper,cardboard and cellulose, constitute acharge having an effect equivalent toa customs duty, which is prohibitedunder Article 13 (2) of the Treatywhen it possesses the followingcharacteristics:

1. it is collected by a publicauthority other than the State alsoon products coming from theother Member States;

2. the revenue therefrom is, by lawand statutory regulation, intendedto be used for the followingpurposes:(a) the financing of various

activities within the territoryof the State for the purposeof increasing domesticagricultural production ofcellulose;

(b) the financing of researchactivity for the benefit ofnational undertakings whichare producers of cellulose andpaper;

(c) the subsidizing exclusively ofnewsprint produced by the

701

JUDGMENT OF 18. 6. 1975 -CASE 94/74

national paper-mills in orderto make it available to the

publishers of the country atbelow the market price. Thesubsidy is not granted inrespect of newsprint andsimilar paper coming frompaper-mills situated in theother Common Marketcountries.

II. If the above-described duty must beconsidered to be a charge havingequivalent effect:1. Is Article 13 (2) of the Treaty directly

applicable and does it confer onprivate individuals a subjective rightof immunity from chargesprohibited by this provision?

2. Does this individual right datefrom 31 December 1969 (the datewhen the transitional period cameto an end) or from 1 July 1968,the date when customs dutieswithin the EEC were abolished?

III. With regard to Question 1 (2) (c)above, and bearing in mind that theENCC duty ultimately subsidizes thenational production of newsprint,does not the said duty conflict withthe Community rules in that, as onlythe paper-mills in the countryconcerned are entitled to benefit

from the duty, they are placed in theposition of being able, to theexclusion of Communitycompetitors, to share out amongthemselves almost the whole of the

Italian newsprint market, thuscreating an agreement which iscontrary to Articles 85 and 86 of theTreaty (cf. the balance sheets of theENCC for the years 1971, 1972 and1973)?

The order of the Pretore of Abbiategrassowas received at the Court Registry on 16December 1974.

Pursuant to Article 20 of the Protocol on

the Statute of the Court of Justice of theEEC, written observations were sub­mitted on 20 February 1975 by theCommission of the European Com­

munities, on 4 March 1975 by theGovernment of the Italian Republic, onthe same date by the Ente Nazionale perla Cellulosa e per la Carta (ENCC), thedefendant in the main action, and on 10March 1975 by IGAV, the plaintiff in themain action.

Upon hearing the report of theJudge-Rapporteur and the views of theAdvocate-General, the Court decided toopen the oral procedure without anypreparatory inquiry.

II — Observations submitted tothe Court

IGAV, the plaintiff in the main action,analyses at length the Court's case-law oncharges having an effect equivalent tocustoms duties and internal taxation,arguing that it follows thereform that anational law can in itself provecompatible with Community law but beincompatible by reason of the effectswhich it produces and the ends which itpursues.

(a) As regards more particularly thenature and effect of the charge levied bythe ENCC, it must be remembered thatit has in effect the characteristics hinted

at in the first question referred to theCourt: it is levied by a public body otherthan the State; payment thereof iscompulsory; although applicable to bothdomestic products and importedCommunity products, it is to a certainextent discriminatory; its purpose is tofinance the various activities of the

ENCC, in particular interventions infavour of domestic production of rawmaterials for the paper industry, toundertake research solely for the benefitof Italian undertakings in the agriculturaland forestry sector and in the field ofpaper, of print and of stationery as wellas support measures in favour of theprinting trade and of aid to the press inthe form of general or specific subsidies,in particular for the utilization of paperproduced in Italy or imported by the

702

IGAV v ENCC

ENCC, to the exclusion of paperimported directly from abroad.

(b) The incompatibility of the charge inquestion with Community law follows inthe first place from the Commission'sdecision of 15 September 1972 in thisconnexion to initiate against the ItalianRepublic the procedure under Article 93(2) of the EEC Treaty; the letter whichon 20 November 1974 was sent by theCommission to the Italian Government

in accordance with this procedureconfirms that only several amendmentsmade by the Italian authorities witheffect from 1 January 1974 rendered thesystem of aid granted through the ENCCcompatible with the provisions of theTreaty in matters of aid. The tax leviedby the ENCC, which has the purpose offinancing aid incompatible withCommunity law, cannot by reason of theabovementioned fact alone beconsidered as internal taxation allowedunder Article 95. Added to this there is

the fact that the aid in question, financedby a tax of a fiscal nature, lacks any'clarity', is of a permanent nature insteadof only amounting to essentiallytemporary measures with the purpose ofstrengthening or supporting temporarilya particular sector and has a 'multiplyingeffect' since it is connected with the

financial charge imposed on importedgoods and, by reason of the fact that themanner in which the funds at the

ENCC's disposal are used, is not clear.

Amounting as it does to a method offinancing activities the purpose of whichis exclusively to favour domesticproducts, the charge in question has thecharacteristics of a charge having aneffect equivalent to a customs duty onimports and for this reason is prohibitedby Article 13 (2) of the EEC Treaty. It isclaimed that the Court must therefore

give an affirmative answer to the first twoquestions, whilst emphasizing thatArticle 13 (2) must as from 1 January1970 be considered directly applicablewithin Member States, that is, as from thedate when the transitional period cameto an end.

The various interventions of the ENCC

financed by means of the revenue fromthe tax in question also have the effect ofseriously distorting competition withinthe Common Market.

Thus the free interplay of competition isadversely affected as betweenCommunity paper manufacturers andthose from Italy, by reason of the factthat it does away with any competitionbetween Italian and the ENCC producerson the Italian newsprint market; theItalian producers of newsprint arefavoured as compared with foreign papermanufacturers particularly as regardsmarketing their production and, asregards newsprint for daily papers orperiodicals, Italian undertakings are alsoin a more favourable position thanforeign undertakings.

There is also distortion of competition inthe relationships between publishers ofItalian newspapers and periodicals andpublishers in other Member States: theguaranteed supply of paper, thedifferentiated aids granted by the ENCCand the agreements as to the sale priceand purchases of paper eliminatecompetition as between Italianpublishing houses; the same factorsalter competition — which exists,notwithstanding the statements to thecontrary by both the ENCC and theCommission — as between publishers ofdaily papers and periodicals in Italy andthe rest of the Community.

These serious adverse effects on

competition are accompanied by a seriesof cartels, which are contrary to Article85 and 3 (f) of the Treaty and in whichthe ENCC participated.

Owing to a mechanism of 'monthlyassignment quotas' and the fixing of thesale-price of paper to Italian newspaperpublishers, agreements between theENCC and the Italian papermanufacturers resulted in a partitioningof the national market in newsprint;further, agreements as regards the

703

JUDGMENT OF 18. 6. 1975 -CASE 94/74

purchase price of paper were entered intobetween the ENCC, the paper

manufacturers and the Italian publishers.Paper manufacturers and publishers andassociations of paper manufacturers andpublishers were also parties to thoseagreements; the ENCC may beconsidered as a public undertaking to theextent to which it carries on activities of

purchasing, stock-piling and distributingor as an association of undertakings tothe extent to which it constitutes a

'compulsory consortium' of undertakings.Depending on the circumstances, thecartels in question took the shape ofagreements, of concerted practices or ofdecisions by associations of undertakingsand consist in fixing purchase andsale-prices and partitioning the markets.They gravely affect intra-Communitytrade, as is shown by the figures relatingto imports by Italy of newsprint fromMember States. Such cartels are

prohibited by Article 85 (1) of the Treaty;their illegality extends to the ENCC'sparticipation.

This conclusion is not weakened by thefact that the ENCC is a publicundertaking: under the provisions ofArticle 90 (1) the prohibitions laid downby Article 85 extend to suchundertakings and Article 90 (2) does notapply to the ENCC.

(d) In conclusion, it is alleged that theCourt ought to reply to the questionsreferred to it by holding the chargelevied by the ENCC upon imports fromMember States of the Community to beillegal, with effect from 1 January 1970until the date of total and effectivediscontinuance of breaches of

Community law resulting from itsoperation.

Having emphasized the special featuresof the injunction proceedings within theframework of which the reference to the

Court was decided upon the EnteNazionale per la Cellulosa e per laCarta, the defendant in the main action,sets out in detail the intervention system

operated by the ENCC, in particular inthe field of the press, in the forestrysector and in matters of documentation

and statistics; the financing of theactivities of the ENCC and the coveringof its administrative expenses are largelyensured by a contribution on paper andcardboard and on cellulose.

(a) As regards the legality of the systemof aids granted through the ENCC, it isreasonable to deduce from its letter of 20November 1974 addressed to the ItalianGovernment that the Commission

recognized its compatibility not onlywith Article 92 but also with Article 13

(2) of the EEC Treaty. This finding is allthe more justified since it corresponds tothe case-law of the Court.

(b) The first question put to the Courtis merely a repetition of that previouslyreferred in Case 77/72; it is notpermissible to the extent to which itresults in a different interpretation of thesame texts or inadmissible to the extent

to which it has as its object aninterpretation of the judgment of 19June 1973 in line with the specific casewhich is the subject of the main action.

Moreover, the purely descriptive factorsput forward in order to confer anappearance of novelty or usefulness onthe question put are either erroneous ortendentious. Thus it is unimportant thatthe duty in question is levied by a publicundertaking other than the State since itis levied under a law of the State; theduty on cellulose is in no way inquestion in the main action and in anyevent it would have an unfavourable

effect on the domestic product which istaxed twice in the course of the

manufacturing process; newsprint isexempted from the ENCC contributionso that the addition to the price ofnewsprint which is paid to publisherscould not, in the absence of a charge,amount to a charge having an effectequivalent to a customs duty; theprevious situation could at the most havefallen under Article 92 but not under

Article 13 (2).

704

IGAV v ENCC

As regards the substance of the problem,it must be placed on record that none ofthe conditions to which the Court

pointed in its judgment of 19 June 1973in Case 77/72 recognizing the existenceof a charge having an effect equivalent toa customs duty is fulfilled in the presentcase: the domestic product taxed and thedomestic product benefiting from the aidare not the same; the proceeds of thecharge are not exclusively granted to thenational paper industry; at any rate theaid does not benefit domestic productsspecifically.

The Court cannot at any rate proceed toa de facto verification in this respectwithin the framework of the presentproceedings.

(c) The case-law of the Court alreadysupplies a reply to the question as to thedirect effect of Article 13 (2). By its verynature this provision lends itself perfectlyto producing direct effects in legalrelationships between Member States andtheir citizens and, in the absence of adirective having the specific purpose ofabolishing a particular charge havingequivalent effect before the end of thetransitional period, the relevant date canonly be 1 January 1970.

(d) As regards Articles 85 and 86 of theTreaty, it must be said that, apart fromthe confused wording of the questionreferred, Article 85 turns out to beinapplicable to the present case: therewere not and there are not now

agreements or concerted practicesbetween national paper manufacturerswith a view to exclusively acquiring theItalian market in newsprint; importationhas never been impeded or made subjectto particular formalities or taxes;importation effected through the agencyof the ENCC allows the publishers tobenefit from aids; the price of newsprintcannot be influenced by competitivepractices, since it is laid downauthoritatively for the whole of theterritory; the limitation of aids can at themost be blamed against public

authorities. Article 90 also does not applyin this case.

As regards Article 86 it must be said thatthe Court has already dismissed it inCase 77/72. In any event the threespecific conditions which in the Court'sview must be present for it to apply, thatis to say, the existence of a dominantposition, the abuse thereof and thedamage caused to trade between MemberStates, are not present in this case.

(e) To summarize, the questionsreferred to the Court might be answeredas follows:

— the prohibition in Article 13 (2) refersto a duty which, whilst part of ageneral system of taxes appliedaccording to the same criteria ondomestic as well as importedproducts, is intended exclusively tosupport activities which specificallybenefit the taxed domestic product;

— Article 13 (2) is a provision havingdirect effect in the legal systems ofthe Member States, with theconsequence that it creates subjectiverights for the parties which the courtsmust as from 1 January 1970 protectin the case of all charges having aneffect equivalent to customs duties,the abolition of which was not

imposed at an earlier date by meansof directives on the part of theCommission;Articles 85 and 86 do not apply to asituation in which domestic industrial

products or imported products offoreign origin imported through apublic body have, on the basis ofofficial regulations, resulted inadvantages to consumers belonging toanother sector of the economy.

The Government of the Italian Republicemphasizes that the question of principleinvolved in this case is strictly analogousto that which the Court examined and

dealt with in its judgment in Case 77/72.There the Court found that a duty withina general system of internal taxationapplying to both domestic and imported

705

JUDGMENT OF 18. 6. 1975 -CASE 94/74

products can constitute a charge havingan effect equivalent to a customs duty onimports subject to the twofold conditionthat is intended exclusively to supportactivities which specifically benefit thetaxed domestic product; the duty forENCC's benefit has neither of thesecharacteristics. It is true that the Court

cannot arrive at this finding within theframework of the procedure underArticle 177 of the EEC Treaty; on theother hand, it is significant that theItalian provisions in question have notbeen the subject of either a procedureinitiated by the Commission on the basisof Article 169 or an action by anotherMember State with a view to a findingthat they might be incompatible withArticle 13 of the Treaty.

The fact that the order referring thematter added certain factors defining thenational rule in question cannot affectthe judgment previously given by theCourt; the factual assessment of thelegality of the charge in dispute, from thepoint of view of Community law, doesnot come within the procedure underArticle 177.

Furthermore, the pointers contained inthe order referring the matter as to thenature and character of the charge inquestion in no way correspond to thereal scope of the Italian legislation in thematter; in particular, contrary to theassertions in point (c) in the firstquestion, newsprint and paper forprinting purposes coming from papermanufacturers establishing in the otherMember States benefit from treatment

identical to that reserved to papercoming from national papermanufacturers, subject only to thecondition that the paper manufactured inthe other Member States be purchased bythe ENCC.

As for the third question, it suffices topoint out that the ENCC is a non-profitmaking institution in public law whichdoes not influence the free availability ofsupplies to users and consumers.

As regards Articles 92 et seq. of the EECTreaty, it must be said that in its letter of20 November 1974 to the Italian

Government the Commission stated that

it had not found any factor which wouldallow it to institute the procedure underArticle 93.

The Commission wishes to point outcertain facts concerning the system ofaids administered by the ENCC; thuswhat is subsidized is not the manufacture

of paper but its utilization for publishingpurposes, since only publishers of dailiesand periodicals benefit from aids; further,since 1 January 1974, consequent uponthe procedure instituted by theCommission under Article 93 (2) of theEEC Treaty, aids apply withoutdistinction to direct imports bypublishers and to indirect importseffected from Member States through theENCC.

(a) As regards the first question

The duty levied by the ENCC, which isnormally considered to be of aquasi-fiscal nature, affects both domesticand imported products; the revenuearising thereform is intended to financeactivities undertaken by the ENCC, inparticular subsidies to daily newspapers,subsidies to periodicals and assistance inagricultural and forestry research and inreafforestation.

As regards the compatibility of thismechanism with Articles 9 and 13 (2) ofthe EEC Treaty, one ought to take intoaccount the criteria enunciated by theCourt's judgment in Case 77/72; a chargeof a quasi-fiscal nature, applyingsystematically to domestic and importedproducts can nevertheless constitute acharge having an effect equivalent to acustoms duty on imports where it isintended exclusively to support activitieswhich specifically benefit the taxeddomestic product. In the present case itshould be noted that the taxed domestic

product (paper and cardboard) and thedomestic product benefiting from the aid

706

IGAV v ENCC

(daily and periodic publications) are notthe same; this finding is in itselfsufficient to avoid the application ofArticle 13 (2).

In any event, even if it were to beconsidered that the aid benefits not the

publications but the raw material utilizedby the publisher, it cannot be held thatthe duty levied on the paper used inperiodicals has the sole purpose offinancing aid to this kind of paper.

As regards Question I (2) (c), theconditions required for identifying acharge having equivalent effect are nottherefore present.

As regards Question 1 (2) (a), it should bepointed out that the condition of'specific' advantage is completely absent,in view of the tenuous and indirect

relationship between taxed products andsubsidized products: forestry research andreafforestation in general allows thedevelopment of the forestry sector andthe supply of timber; these activitiessometimes extend over very long periodsand do not necessarily relate to theproduction of paper pulp, since thisproduct is only one of severalcommercial uses for timber.

As regards Question 1 (2) (b), thecondition that the proceeds of the dutybe 'exclusively' allocated to the financingof research in the paper sector is notpresent; equally the condition of'specific' advantage has not been fulfilled.

These findings certainly do not allow ofthe conclusion that the system of aid topaper research is compatible with theTreaty; in the course of the period towhich the main action refers it

contravened Article 92 and the necessaryamendments did not come into effect

until 1 January 1974. Nevertheless, asregards Article 13 (2) the duty on paperand cardboard does not seem open tocriticism from the point of view of itsbeing allocated to the financing of paperresearch; the situation is no different if

looked at in conjunction with theintervention on behalf of periodicals andthe research in the forestry sector: thesum total of the three charges inquestion does not even approach asufficient level to enable one to treat the

condition of 'exclusive' purpose as havingbeen fulfilled.

(b) As regards the second question

Article 13 (2) undoubtedly has directeffect.

The date to be taken as the end of the

transitional period is 31 December 1969,subject to cases in which directiveswithin the meaning of Article 13 (2) wereadopted. This conclusion follows fromArticle 8 of the Treaty; amendments tothe time-table which this provision laysdown were expressly indicated in themeasures adopted by the Council.. Thereference in the order referring thematter to 1 July 1968 reminds one of the'Acceleration Decision' of the Council of

26 July 1966 (Official Journal p. 2971).This allowed the implementation of thecustoms union as from 1 July 1968;nevertheless it cannot be argued that theimplementation of the customs unionput an end to the transitional period forthe establishment of the CommonMarket.

(c) As regards the third question

Since the aid was intended for and

granted in favour of the press and not ofnational paper manufacturers, the systemof aid previously in force involved anelement of protection in favour ofdomestic production of newsprint anddiscouraged direct importations; it wasamended on this point so as to ensure itsconformity with Article 92 of the Treaty.

Although the system involves a distortionof competition, it must be stated that, inso far as Articles 85 and 86 are

concerned, neither the essentialcondition of illegal conduct which canbe imputed to an undertaking or group

707

JUDGMENT OF 18. 6. 1975 -CASE 94/74

of undertakings nor the conditionsnecessary for a finding of a cartel or of adominant position are met in this case.

III — Oral procedure

The oral observations of IGAV, theplaintiff in the main action, representedby Giovanni Maria Ubertazzi and FaustoCapelli, Advocates of Milan, of EnteNazionale per la Cellulosa e per la Carta,the defendant in the main action,

represented by Giuseppe Marchesini andAntonio Sorrentino, Advocates of Rome,of the Government of the Italian

Republic, represented by Giorgio Zagari,Sostituto Avvocato dello Stato, and ofthe Commission of the EuropeanCommunities, represented by its LegalAdviser, Antonio Abate, were presentedat the hearing on 23 April 1975.

The Advocate-General delivered his

opinion at the hearing on 15 May 1975.

Law

1/2 By order of 14 November 1974 received at the Court Registry on16 December 1974 the Pretore of Abbiategrasso, referred several questionsunder Article 177 of the Treaty. These questions were raised in the course ofproceedings brought by the plaintiff in the main action against EnteNazionale per la Cellulosa e per la Carta, (ENCC), in relation to dutiesclaimed by that institution at the marketing stage of paper products comingfrom other Member States of the Community, under the provisions of LawNo 868 of 13 June 1940 (Gazzetta Ufficiale No 170 of 22 July 1940) and LawNo 168 of 28 March 1956 (Gazzetta Ufficiale No 79 of 3 April 1956).

3 In order to enable it to judge whether the fiscal mechanism instituted bythese legislative measures is compatible with the provisions of the Treaty, thenational court has asked this Court to define the concept of 'charges havingan effect equivalent to customs duties as defined in the judgment of 19 June1973 in Case 77/72 (Capolongo v Maya [1973] ECR 611), to state whetherArticle 13 (2), dealing with the abolition of such charges, has direct effect, toindicate the date from which such effect may be invoked and, finally, todetermine in certain respects the scope of the rules on competition laid downby Article 85 and 86.

4/7 It must be remembered in this context that by notice published in theOfficial Journal of 26 September 1972 (C 98, p. 1) the Commission initiated aprocedure under Article 93 (2) of the Treaty in relation to the Italian systemof aid, administered by the ENCC and financed by a charge of a quasi-fiscalnature on certain types of paper and cardboard as well as on pulp. Followingan inquiry which it had undertaken, the Commission required certainmodifications in relation to this system of aid, which were accepted by the

708

IGAV v ENCC

Italian Republic as is shown by a memorandum of 20 November 1974 fromthe Commission to the Government of that Member State. In that

memorandum the Commission found that 'the modifications made by theItalian authorities to the system in question render it compatible with theprovisions of the Treaty with regard to aid'. In relation to the foregoing itmust be pointed out that the proceedings before the Pretore of Abbiategrassorelate to the period prior to the modification of the system in question.

The concept of charges having an effect equivalent to customsduties

8 The first question asks for an interpretation of the concept in Article 13 (2) of'charges having an effect equivalent to customs dusties' in relation to duessuch as the duty levied by the ENCC at the marketing stage of importedpaper, cardboard and pulp, taking into account both the manner of collectingthese dues and the purpose to which the revenue derived therefrom isapplied.

9 In order to interpret this concept the following three factors must beremembered in connexion with the duty in dispute:

(a) the duty is levied by an autonomous institution governed by public law,devoid of any commercial character,

(b) it is applied without distinction to domestic products and to productsfrom other Member States,

(c) the proceeds are allocated to certain development and research activities ofinterest to the cellulose and paper industry, the major part however beingreserved for the payment of subsidies to newsprint, which is itself exemptfrom the duty.

10 As was ruled in the judgment of 19 June 1973 to which the national courtrefers, the prohibition contained in Article 13 (2) is aimed at any taxdemanded at the time of or by reason of importation and which, beingimposed specifically on an imported product to the exclusion of a similardomestic product, results in the same restrictive consequences on the freemovement of goods as a customs duty by altering the cost price of thatproduct.

709

JUDGMENT OF 18. 6. 1975 -CASE 94/74

11 The fact that a duty is levied by an independent institution governed bypublic law rather than levied by the State itself and is used by that institutionfor purposes intended by the relevant legislation involves no difference withregard to the possible definition of that fiscal charge as a charge having aneffect equivalent to customs duties, since the prohibition under Article 13 (2)attaches solely to the effect of such charges and not to the manner in whichthey are imposed.

12/13 On the other hand, the fact that a charge applied without distinction todomestic products as well as to products from other Member States gives riseto the question whether the taxation at issue falls within the prohibition ofArticle 13 (2) or the rule against discrimination in matters of internal taxationlaid down by Article 95.

One and the same scheme of taxation cannot, under the system of the Treaty,belong simultaneously to both the categories mentioned, having regard to thefact that the charges referred to in Article 13 (2) must be purely and simplyabolished whilst, for the purpose of applying intern'al taxation, Article 95provides solely for the elimination of any form of discrimination, direct orindirect, in the treatment of the domestic products of the Member States andof products originating in other Member States.

14 Financial charges within a general system of internal taxation applyingsystematically to domestic and imported products according to the samecriteria are not to be considered as charges having equivalent effect.

15/17 The situation would be different, however, if such a duty, which is limited toparticular products, had the sole purpose of financing activities for thespecific advantage of the taxed domestic products, so as to make good, whollyor in part, the fiscal charge imposed upon them. Such a fiscal device would infact only appear to be a system of internal taxation and accordingly could byreason of its protective character be termed a charge having an effectequivalent to customs duties, so as to bring Article 13 (2) into operation. Sucha definition would nevertheless imply a clearly established likeness between,on the one hand, the collection of a fiscal duty levied without distinction onthe products in question, whether domestic or imported and, on the otherhand, the advantage which ensures only for the benefit of the domesticproducts by reason of the proceeds of that same duty.

710

IGAV v ENCC

18 Accordingly the answer to the first question must be that a duty falling withina general system of internal taxation applying systematically to domestic andimported products according to the same criteria can nevertheless constitute acharge having an effect equivalent to a customs duty on imports when suchduty is intended exclusively to support activities which specifically benefit thetaxed domestic product.

19/20 The second question asks whether Article 13 (2) is directly applicable and if itconfers on private individuals a subjective right of immunity to chargesprohibited by this provision. It further asks whether this subjective right datesfrom 31 December 1969 (the date when the transitional period came to anend) or from 1 July 1968, the date when customs duties within theCommunity were abolished. These questions have been put in the event thatthe duty in question be considered as a charge having an effect equivalent toa customs duty.

21 It is a matter for the national court to define the duty in question, either as acharge having an effect equivalent to a customs duty or, on the basis of thelegal criteria outlined above, as internal taxation within the meaning ofArticle 95. Accordingly, in order to provide for the possibility of this beingrelevant, an answer must be given to the question put.

22/25 As the Court has already indicated in its judgment of 19 June 1973 to whichreference has been made, Article 13 (2) lends itself, by its very nature, toproducing direct effects in the legal relations between Member States andtheir subjects. Subject to any specific provisions, such effect occurred as fromthe end of the transitional period, namely 1 January 1970. In fact theCouncil's decision of 26 July 1966 on the abolition of customs duties in linewith the implementation of the Common Customs Tariff on 1 July 1968(OJ p. 2971) is based on the concept of a selective acceleration of actionswhich as a whole were to be completed by the end of the transitional periodat the latest. In these circumstances that decision only applies to measures towhich it specifically refers, that is to say, to customs duties as such and toquantitative restrictions.

26 In principle the reply must therefore be that the direct effect of Article 13 (2)can only be invoked as from 1 January 1970.

711

JUDGMENT OF 18. 6. 1975 -CASE 94/74

27/28 The applicant in the main action put forward in addition a wide range ofcriticisms in relation to the system of importation of paper, cardboard andpulp into Italy. It considers that the fiscal system applied under the Italianlegislation is discriminatory with regard to products imported from otherMember States and that the interposition of the ENCC has so restrictive aneffect on trade as practically to eliminate the possibilities of intra-Communitytrade on the Italian market. In particular it points out that the changes madein the Italian legislation following the steps taken by the Commission are arecognition of the fact that, at any rate up to the time of the elimination ofthe incompatibilities found to have existed, this system was contrary to theprovisions of the Treaty relating to public aid. From this it draws theconclusion that a duty intended to finance the functioning of such a systemmust be considered a charge prohibited by the Treaty.

29/31 The fact that a due imposed by a Member State is utilized for the purpose offinancing a system of aid which is recognized as incompatible with the Treatydoes not attach to such due the character of a charge having an effectequivalent to a customs duty. Moreover, whatever doubts may be felt asregards the compatibility with the Treaty of the system in question and asregards the ENCC's intervention in the field of intra-Community trade,especially from the point of view of the prohibition of measures having aneffect equivalent to quantitative restrictions, the fact remains that the nationalcourt did not ask this Court to rule on these aspects. Despite the referencemade by the national court in its order referring the matter to the principle ofthe free movement of goods, to the objective of merger of the differentnational markets into a single market and to the elimination of any form ofdiscrimination by the Treaty, there are no questions before the Court ofsufficiently precise a nature to enable it to consider the objections raised bythe applicant in the main action. Accordingly these arguments must bedisregarded in the framework of the present proceedings.

The system of competition

32 The third question asks in substance whether or not the redistribution ofcharges and benefits between importers of paper cardboard and pulp, on theone hand, and of national producers and consumers of these goods, on theother, as well as the ENCC's intervention within the framework of thisredistribution, infringe the rules on competition laid down in Articles 85 and86 of the Treaty.

712

IGAV v ENCC

33/34 Apart from the rules on competition applicable to undertakings, includingArticles 85 and 86, to which the reference was made by the national court,the Treaty includes various provisions relating to infringements of the normalfunctioning of the competition system by actions on the part of the States.This in particular is the purpose of Article 90 to the extent to which it laysdown a particular system in favour of undertakings entrusted with theoperation of services of general economic interest or having the character of arevenue-producing monopoly, of Articles 92 to 94, on the system of publicaid, of Articles 101 and 102 on distortions resulting from provisions of publiclaw capable of distorting competitive conditions on the Common Market, aswell as Article 37 on State monopolies of a commercial character.

35 The activities of an institution of a public nature, even if autonomous, fallunder the provisions referred to and not under Articles 85 and 86, even if itsinterventions take place in the public interest and are devoid of a commercialcharacter.

36 It is a matter for the individual and the national courts to take the appropriatemeasures in so far as the interventions of the State or of its decentralized

agencies might infringe such rules as might be directly invoked in legalproceedings. It is, moreover, for the Commission to see to it that the relevantprovisions of the Treaty are respected by the authorities of the Member States.

37 Accordingly, the answer to the question must be that according to the systemof the Treaty the provisions of Articles 85 and 86 are not applicable toactivities of the kind covered by the question.

Costs

38 The costs incurred by the Government of the Italian Republic and theCommission of the European Communities, which have submittedobservations to the Court, are not recoverable and as these proceedings are, inso far as the parties to the main action are concerned, a step in the actionpending before the Pretore of Abbiategrasso, the decision on costs is a matterfor that court.

713

JUDGMENT OF 18. 6. 1975 -CASE 94/74

On those grounds

THE COURT

in answer to the questions referred to it by the Pretore of Abbiategrasso byorder of that court of 14 November 1974, hereby rules:

1. A duty falling within a general system of internal taxationapplying systematically to domestic and imported productsaccording to the same criteria can nevertheless constitute acharge having an effect equivalent to a customs duty onimports, when such duty is intended exclusively to supportactivities which specifically benefit the taxed domesticproduct;

2. As from 1 January 1970 Article 13 (2) produces, by its verynature, direct effects in the legal relations between theMember States and their subjects;

3. The provisions of Articles 85 and 86 do not apply to activitiesof the kind referred to by the national court.

Lecourt Mertens de Wilmars Mackenzie Stuart Donner Monaco

Pescatore Kutscher Sørensen O'Keeffe

Delivered in open court in Luxembourg on 18 June 1975.

A. Van Houtte

Registrar

R. Lecourt

President

714