JUDGMENT OF 4. 3. 1980 — CASE 49/79

In Case 49/79

RICHARD POOL, Farmer, of Higher Trayne, Ilfracombe, Devonshire, England, represented by Andrew Durand of the Middle Temple, Barrister, instructed by W. H. Hadfield & Son, Solicitors, Farnham, with an address for service in Luxembourg c/o Shirley Ward, Résidence Belle-Vue, 79 Rue du Kiem, Strassen, applicant, v

COUNCIL OF THE EUROPEAN COMMUNITIES, represented by Daniel Vignes and Bernhard Schloh, Director and Adviser respectively in the Legal Department of the Council, with an address for service in Luxembourg at the office of J. N. Van den. Houten, Director of the Legal Departement of the European Investment Bank, 2 Place de Metz, defendant,

APPLICATION for damages under the second paragraph of Article 215 of the EEC Treaty,

THE COURT

composed of: H. Kutscher, President, A. O'Keeffe and A. Touffait (Presidents of Chambers), J. Mertens de Wilmars, P. Pescatore, Lord Mackenzie Stuart, G. Bosco, T. Koopmans and O. Due, Judges,

Advocate General: G. Reischl Registrar: A. Van Houtte

gives the following

570 POOL v COUNCIL

JUDGMENT

Facts and Issues

The facts of the case, the course of the into another, the Council by Regulation procedure and the submissions and No 222/73 of 31 January 1973 on the arguments of the parties may be exchange rates to be applied in agri­ summarized as follows: culture for the currencies of the new Member States (Official Journal L 27, p. 4) fixed the rate of exchange to be applied for the conversion of prices and other amounts, in derogation from Article 2 (1) of Regulation No 129, for I — Facts Ireland and the at the rate corresponding to the representative rate for the currencies of those two Member States, the representative rates Regulation No 129 of the Council of 23 being: £1 sterling = £1 Irish = 2.3499 October 1962 on the value of the unit of United States dollars = 2.1644 units of account and the exchange rates to be account. applied for the purposes of the common agricultural policy (Official Journal, English Special Edition 1959-1962, page 274) stated on the one hand that sums In Regulation No 2498/74 of 2 October should be expressed in a standard unit of 1974 fixing representative conversion account in a number of instruments on rates to be applied in agriculture for the the common agricultural policy and on currencies of the new Member States the other hand that it was necessary to (Official Journal L 268, p. 6) the Council fix the rate of exchange to be used for stated that the conversion rates to be measures taken in pursuance of the applied in agriculture had been fixed common agricultural policy which with the aim of reflecting economic required sums given in one currency to realities as closely as possible but that at be expressed in another currency. Article that time the aim was no longer being 1 of the Regulation therefore fixed the achieved in the case of the United value of the unit of account at Kingdom and Irish currencies as the 0.88867088 grams of fine gold; under conversion rates actually recorded for Article 2 (1) the to be those two currencies on exchange applied was to be that which corre­ markets had since shown a significant sponded to the par value communi­ depreciation. Consequently Article 1 (1) cated to and recognized by the Inter­ of Regulation No 2498/74 provided that national Monetary Fund. "where transactions to be carried out in pursuance of instruments relating to the common agricultural policy or specific rules laid down under Article 235 of the In pursuance of Article 3 (1) of Regu­ Treaty require the currencies of the new lation No 129, which permits dero­ Member States to be expressed in gations from the principle of using the another currency or in units of account, par value for converting one currency the rate of exchange to be applied for

571 JUDGMENT OF 4. 3. 1980 — CASE 49/79 the conversion of prices and other In its defence the Council has dealt amounts shall, in derogation from Article solely with the question whether in this 2 (1) of Regulation No 129, be that case, the first condition for the which corresponds to the representative Community to incur liability arising from rates for the currencies of those Member a legislative act involving choices of States"; Article 1 (2) fixed the following economic policy is fulfilled, namely representative rates: whether there has been a sufficiently serious breach of a superior rule of law for the protection of the individual; it (a) for the Irish pound: £1 Irish = has suggested that the existence of the 1.9485 units of account; other conditions for an action for damages should only be discussed, if (b) for the : £1 sterling = necessary, later in a separate phase of the 2.0053 units of account. proceedings.

In these circumstances the applicant has By Regulation No 475/75 of the Council not lodged a reply. of 27 February 1975 on the exchange rates to be applied in agriculture On hearing the report of the Judge- (Official Journal L 52, p. 28), the rep­ Rapporteur and the views of the resentative rate was fixed, for the Irish Advocate General the Court decided to pound at 1.86151 units of account and open the oral procedure without any for the pound sterling at 1.96178 units of preparatory inquiry. It did however account. invite the applicant to identify more precisely the provisions of Regulation No 2498/74 which he regards as illegal Richard Pool, farmer, of Higher Trayne, and to explain the considerations on Ilfracombe, Devonshire, England, fattens which his application is based, in calves for sale as adult bovine animals. particular the reasons leading him to belive that the representative rate for the He takes the view that when the Council pound sterling was in itself fixed in a as from 7 October 1974 fixed the rep­ manner incompatible with the Treaty; resentative rates of the British and Irish the applicant complied with this request currencies applicable for the purposes of within the prescribed period. At the the common agricultural policy at request of the Court the Council different rates for the pound sterling and commented in writing on the applicant's the Irish pound, it breached the replies. prohibition on discrimination set out in Article 40 (3) of the EEC Treaty and caused him damage for which compensation is due to him. Ill — Conclusions of the parties

The applicant claims that the Court should: II — Written procedure (a) award him damages of £9 504 against the European Economic On 28 March 1979 Richard Pool lodged Community in the person of the an application under the second Council of the European paragraph of Article 215 of the EEC Communities; Treaty for compensation against the Council of the European Communities. (b) order the Council to pay the costs.

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The Council contends that the Court the consumer and the Irish Government should: to favour the producer are illegal.

(a) dismiss the application; The present system of pricing is arbitrary because it results in purely national pricing and is clearly unlawful; the clearest demonstration of this is that the (b) order the applicant to pay the costs. United Kingdom and Ireland, which used to enjoy free trade, no longer do so, despite the fact that they continue to share a common currency. IV — Submissions and arguments of the parties during the Article 3 of Regulation No 129 does not written procedure permit the Council to abandon any attempt to fix a rate of exchange which bears a relationship to a currency market and still less to start from the opposite The applicant recalls that Regulation No end and decide what a farmer should 805/68 of the Council of 27 June 1968 receive in national currency and what a on the common organization of the consumer should pay in national market in beef and veal (Official Journal, currency. Where a monetary practice of English Special Edition 1968 (I), p. 187) an exceptional nature is in all respects laid down a single price system for beef identical in the case of two currencies and veal within the Community. there is no warrant in Article 3 of Regu­ lation No 129 for treating them differently. (a) Under the second subparagraph of Article 40 (3) of the EEC Treaty, a In particular it does not give the common organization of the market is to Community a discretion to fix, on a exclude any discrimination between nation by nation basis, the price which it producers or consumers within the considers a farmer should receive on a Community and a common price policy particular market. Regulation No 129 must, under the third subparagraph of provides for the neutral conversion into the same provision, be based on common national currency of the sums expressed criteria and uniform methods of calcu­ as units of account. The regulation does lation. not confer on the Council the absolute discretion to lay down any exchange rates it considers appropriate; the unit of Conversion rates for all the Member account was intended to produce an States should therefore be objective and, objective and politically neutral instru­ where possible, reflect monetary reality. ment for expressing common prices. If the Irish pound and the pound sterling are convertible they must have the same rate of conversion vis-à-vis other (b) It follows from the case-law of the currencies and themselves. Court that the liability of the Community arises in the case of legislative provisions if the Community The present arrangements, which enable has committed a sufficiently serious the United Kingdom Government, for breach of a superior rule of law for the short-term political reasons, to favour' protection of the individual. The rules

573 JUDGMENT OF 4. 3. 1980 — CASE 49/79 laid down in Article 40 (3) of the EEC the pound sterling. The Council has no Treaty are clearly designed to protect the discretion to treat two identical interests of the individual farmer and monetary situations in a different way. consumer. They impose on the Council a The reasons advanced by the Council for clear and precise obligation not to mani­ explaining the different treatment of the pulate prices State by State. Article 40 two currencies in question do not justify (3) contains a fundamental constitutional the differentiation: the differences guarantee: it is the counterpart to between Ireland and the United conferring on the Community the power Kingdom have always existed and will to regulate the agricultural markets. continue to exist.

The fundamental constitutional guaran­ It is hardly consistent with the tee of Article 40 (3) has been flagrantly guarantees of the common agricultural infringed by the Council by Regulation policy for a United Kingdom farmer, in No 2498/74 and subsequent regulations every respect comparable to a farmer in in so far as they have not complied with Ireland, to be treated differently merely uniform methods of calculation and because he farms in England rather than common criteria and at least in so far as in Ireland. different conversion rates have been laid down for the pound sterling and the Irish pound. Rates of exchange should be as neutral as possible, the political element being found in the deliberations leading to the Article 40 (3) places limits on any fixing of the common price in units of discretionary power of the Community. account. The wide discretion undoubtedly enjoyed by the Community legislature is limited by the requirement of employing, in the differentiation of the facts, In any event, if the differentiation objective criteria and objectively justified brought about between the Irish pound criteria. If they do not exist the differen- and the pound sterling by Regulation No tation is discriminatory. 2498/74 was not illegal at the time when that regulation was adopted it became so when differentiation was maintained and indeed increased in the subsequent regu­ Article 39 of the EEC Treaty, which lays lations. down the objectives of the common agri­ cultural policy, whilst it enables the Community to take into account various considerations, nowhere enables the (d) The Council does not even argue Community to differentiate because of that the so-called representative rates national territory. were representative of anything; in this situation the applicant can hardly argue that the rate of exchange fixed for the pound sterling was in itself incorrectly (c) Regulation No 2498/74 does not fixed save that it was not representative contain a single word of justification for of any real monetary relationship with the differentiation between the rep­ the currency of any other country, the resentative rates of the Irish pound and clearest proof of which is the absence of

574 POOL v COUNCIL

any similarity with the Irish pound. The been in had the Community performed applicant has chosen the Irish pound for its obligation. The appropriate level of comparison merely because the discrimi­ compensation to the applicant is that nation is there most obvious. which would put him in the same position as if he had been selling in the Republic of Ireland. The damage is the difference between the price received on (e) It is evident from the case-law of sale of bovine animals and the price the Court that a person who, in the which he would have received if the event of a breach of Community law by representative rate for the Irish pound a Member State, relies on a provision had applied in place of the representative relating to non-discrimination must be rate for the pound sterling. For the placed by the national court in such a period from 11 October 1976, the date position that in his individual case the from which the difference in the rate breach of Community law by the between the pound sterling and the Irish Member State has been nullified. The pound exceeded 10 %, until the end of Treaty should not be interpreted as February 1979, the damage suffered by laying down a greater level of protection the applicant may thus be evaluated at for private individuals against breach of 9 504 pounds sterling. Community law by a Member State than against the Community in the case of breach of Community law by the The Council recalls that, under the Community itself. The only court in a consistent case-law of the Court of position to uphold Community rights in Justice, the Community does not incur this situation is the European Court. An liability for damage caused through the annulment action, even if it were effects of a legislative measure involving available, would not be suitable for this choices of economic policy unless a purpose; the appropriate procedure is the sufficiently serious breach of a superior action for damages. The Court can, by rule of law for the protection of the awarding the applicant compensation, individual has occurred. ensure that the rights which he derives from the Treaty are safeguarded.

It is true that the prohibition on discrimi­ nation laid down in the second subpar­ agraph of Article 40 (3) of the EEC (0 It is true that the applicant has Treaty is designed for the protection of never sold in Ireland or into intervention the individual. However, in order to in Ireland; the decisive point is that in justify an action for damages, damage terms of intervention prices or market must have occurred and there must be a prices expressed in pounds the applicant causal connexion between the damages would at all times have received more if being claimed and the breach of the rule he had been selling in Ireland. He has of law. thus suffered damage because of the discriminatory conduct of the Council which flagrantly infringes the Treaty. In this case the Council did not breach the prohibition on discrimination and in any event did not do so in a sufficiently The correct measure of the damage serious way; it did not unjustifiably treat suffered is compensation to put the two factual situations differently when applicant in the position he would have identical circumstances obtained: suf-

575 JUDGMENT OF 4. 3. 1980 — CASE 49/79 ficient reasons justify the differentiated has continued: thus, under Council treatment complained of. Regulation No 643/79 of 29 March 1979 (Official Journal L 83, p. 1), the rates at present applicable are, for the pound sterling, 1.49794 units of account and for the Irish pound 1.26702 units of (a) In pursuance of Regulation No account. The representative rates for the 805/68 the Council fixes for each various national currencies are fixed on marketing year a guide price and an the basis of a proposal from the intervention price for adult bovine Commission, which is itself preceded by animals; that price, laid down in units of a suggestion from one or more Member account, is the common price within the States concerned. In this way the common agricultural policy. It was fixed Council respects the prohibition on in pursuance of the third subparagraph discrimination. of Article 40 (3) of the Treaty. As European farmers are not paid for their products in units of account but in their national currencies, it is necessary to lay down an exchange ratio between the unit The fact that the rate for the Irish pound of account and national currencies. This and that for the pound sterling were was the point of Regulation No 129 identical for the non-agricultural sector which determined the value of the unit plays no role in this case, which concerns of account on the basis of its fine gold conversion for the purposes of the content. Subsequently the international common agricultural policy. monetary system set up by the Bretton Woods Agreements and the values of the various national currencies underwent major changes: there is no longer any firm exchange ratio between national (c) There were objective reasons for currencies and gold; for the conversion setting different representative rates for of the unit of account into national the pound sterling and the Irish pound. currencies, the specific amount of fine gold has been replaced by the rep­ resentative rate or "green rate" for each national currency and, since 1971, monetary compensatory amounts have The Community has incontestably, in the been introduced for trade between the field of the common agricultural policy, majority of the Member States. the power to fix representative rates for the various national currencies.

(b) As regards more particularly the representative rates of the pound sterling The prohibition of discrimination and the Irish pound, these were fixed at contained in the second subparagraph of the same value in the early days of the Article 40 (3) of the EEC Treaty is one application of the common agricultural of the principles of Community law; policy to the new Member States. As however, in the pursuit of the objectives from 7 October 1974, Regulation No of the common agricultural policy 2498/74 fixed the Irish pound at 1.9485 attention should be paid also to ensuring units of account and the pound sterling a fair standard of living for the agri­ at 2.0053 units of account. This trend cultural community (Article 39 (1) (b))

576 POOL v COUNCIL

and reasonable prices for supplies to increase in the price of food to consumers (subparagraph (e)). It is consumers than in the case of Ireland. possible to give some objectives temporary precedence over others. It is also necessary to take account of the fact that in the Member States agriculture constitutes a sector closely linked with the economy as a whole (Article 39 (2) In setting representative rates under (c))· Regulations Nos 129 and 2543/73 of the Council of 19 September 1973 amending Regulation No 129 on the value of the unit of account and the rates of exchange to be applied in the common agricultural policy (Official Journal The Council is thus required to weigh L 263, p. 1) the Council has a wide the merits of various reasons one against discretion, which it has not abused but the other. This involves judging exercised in a reasonable manner. The situations on the basis of economically measure disputed by the applicant is a justified criteria, that is to say, fixing the measure of economic policy "in which amounts in question at an economically one of the chief features is the exercise justified level. of a wide discretion essential for the implementation of the common agri­ cultural policy". The slower reduction of the representative rates in the United Kingdom where consumer prices are of much greater importance than in Ireland, was intended to produce a slower rise in It is well known that the place of agri­ those prices. This was an economically culture in the economy of Ireland differs justified criterion so that there has been from that in the United Kingdom; this is no discrimination. The part played by particularly the case with beef and veal. agriculture in the economy of the United Kingdom is different from that which it plays in Ireland; it is thus permissible for the representative rates also to be different. Ireland is an agricultural exporting country whereas the United Kingdom is a consumer country. "Devaluation" of the representative rates means that the farmer receives a higher income in his own currency and that consumers have (d) Thus the adoption of different to pay higher prices for agricultural representative rates for the pound products. The interests of consumers and sterling and the Irish pound was a the whole of the economy have to be decision within the Council's discretion, taken into consideration when shaping taken on the basis of economically agricultural policy. In the case of the justified criteria, and it in no way United Kingdom, the State concerned, infringed the prohibition on discrimi­ then, the Commission in its proposal and nation. The claim for damages made by the Council when adopting its decision the applicant is thus without foundation. decided on a lower "devaluation" of the At all events the Council did not representative rate than that for the Irish "manifestly and gravely" disregard the pound and consequently for a smaller limits on the exercise of its powers.

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(e) Damages cannot be claimed in the V — Oral procedure absence of an infringing act. In any event it should be noted that the market price The applicant, Richard Pool, represented for beef and veal in Ireland was lower by Andrew Durand, and the Council, than that in the United Kingdom during represented by Bernhard Schloh, the entire period in question. Thus, if the presented oral argument and their applicant had sold his produce in Ireland answers to questions put by the Court at he would have received less than in the the sitting on 4 December 1979. United Kingdom; he has therefore not The Advocate General delivered his incurred any loss in selling his produce opinion at the sitting on 17 January in the latter Member State. 1980.

Decision

! By an application of 28 March 1979 the applicant, who is a cattle breeder established in the United Kingdom, sought compensation under the second paragraph of Article 215 of the Treaty in the sum of £ 9 504 for the damage which the Council was alleged to have caused him when it determined the conversion rate for the pound sterling in Regulation No 2498/74 of the Council of 2 October 1974 fixing representative conversion rates to be applied in agriculture (Official Journal L 268, p. 6) and the subsequent regu­ lations on the same subject.

2 The applicant takes the view that as a result of the Council's improper determination of the conversion rate for the pound sterling for the purposes of the common agricultural policy (hereinafter referred to by the term "green rate") he did not, when selling his produce, obtain the prices which he should have received under the provisions of the common organization of the market in beef and veal (Regulation No 805/68 of 27 June 1968, Official Journal, English Special Edition 1968 I, p. 187) if the "green rate" for the pound sterling used to convert agricultural prices fixed in European units of account into the national currency of the United Kingdom had been determined by the Council in the proper way. He considers that when determining the conversion rate the Council manifestly infringed the provisions of Article 40 (3) of the Treaty which requires the common organi­ zations of the market to exclude any discrimination between producers or

578 POOL v COUNCIL

consumers within the Community and provides that any common price policy shall be based on common criteria and uniform methods of calcu­ lation.

3 The applicant thinks that the Council, when determining the conversion rate applicable to the pound sterling under the common agricultural policy, over­ valued that currency in particular, so that agricultural prices in the United Kingdom were fixed at an appreciably lower level than that of prices guaranteed to agriculture in the other Member States. Using the monetary conversion rates applicable at the time as the basis for calculation, he comes to the conclusion that agricultural prices in the United Kingdom were 30 % lower than the highest prices existing in the Community, 23 % lower than the average prices ruling in the Member States and 21 % lower than prices guaranteed to Irish farm producers. The disparity in the latter case seems to him to be particularly flagrant because at the time under consideration the United Kingdom and Ireland were part of the same monetary system.

4 The applicant, apparently considering the conversion rate for Ireland as having been determined satisfactorily, submits that an appropriate level of damages would be such as to put him in the same position as if he had sold his produce in the Republic of Ireland. Upon comparing the prices which he received during a period from 7 October 1974 to 1 March 1979 to the prices which he could have obtained during the same period in Ireland, he estimates that his loss amounts to £ 9 504 for which he seeks an award of damages from the Community.

s The Court asked the applicant at the conclusion of the written procedure to explain precisely the reasons leading him to believe that the conversion rate for the pound sterling had been determined improperly in relation to the value of not only the Irish pound, but also the currencies of the other Member States. The applicant however confined himself to repeating the arguments put forward in his application; he confirmed that he only intended to make the comparison between the green pound sterling and the green Irish pound since he regarded the determination of the rate for the Irish pound to be more "representative of the real monetary relationship" than the

579 JUDGMENT OF 4. 3. 1980 — CASE 49/79

rate determined for the pound sterling and because in his opinion this comparison illustrated the discrimination most clearly.

6 The application calls in question several Council regulations relating to fairly fundamental questions of economic and monetary policy in the agricultural sector. Essentially, by making choices in the determination of the conversion rate for the pound sterling in relation to the unit of account, the Council allegedly incurred liability to the applicant.

7 With a view to dealing with this claim, it is appropriate to recall the conditions upon which the liability of the Community may arise under the second paragraph of Article 215. As the Court has already indicated in its judgment of 2 July 1974, Holtz & Willemsen v Council and Commission (Case 153/73, ECR 675), Community liability depends on the coincidence of a set of conditions as regards the unlawfulness of the acts alleged against the institution, the fact of damage, and the existence of a direct link in the chain of causality between the wrongful act and the damage complained of.

8 It is in the light of those criteria that the substance of the application should be examined. The applicant was mainly intent upon demonstrating in the light of the provisions of Article 40 (3) of the Treaty the unlawfulness of the Council regulations designed to determine the conversion rate for the pound sterling in the context of the common agricultural policy. However, before entering into these arguments, it is appropriate to ask whether the applicant has proved, if only prima facie, that he has in reality suffered the damage for which he claims compensation.

9 In order to prove the existence of the damage which he claims he has suffered, the applicant has put before the Court statistics meant to show the comparative trend of sale prices for cattle in the different Member States following a system of his own, using both monetary exchange rates and the agricultural exchange rates determined by the disputed regulations. He himself admits that these calculations have an illustrative value only; in the final analysis the proof of the existence and the amount of damage alleged rests exclusively upon the relationship between the level of prices in the United Kingdom and that of prices in Ireland. This attempted proof is not convincing for two reasons.

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io First, the applicant fails to see the legal nature of prices determined under the common organization of the market for beef and veal. He could establish damage only if the determination of certain levels of prices in the context of the common organization of the market had the effect of giving producers the right to dispose of their produce at a guaranteed price level. Only in that case in fact could a producer establish that damage was caused, ascertainable from the level of prices determined under the common organization of the market and from the level of prices ruling as a result of monetary measures adopted by the Council. That is not the effect of the price system established under the applicable rules. Those prices are to determine on the one hand the implementation of the various measures of intervention in the market, and on the other to adjust the level of levies and refunds applicable in trade with non-Member States. By virtue of that machinery the common organi­ zation of the market gives the Community producers the advantage of a level of prices substantially higher than the level of prices prevailing on the world market. It is true that the prices obtained by individual producers are indirectly determined by the combination of intervention in the market and the arrangements for the Community's external trade, but in spite of that it is not possible to take the view that the price system guarantees to individual traders that their produce will be disposed of at the precise price level determined by Community rules. As a result, that level, expressed in units of account, does not constitute a value which could be used as a basis for comparison with the prices obtained by a producer on the market with a view to demonstrating that certain damage has been caused.

n It should moreover be observed that the demonstration undertaken by the applicant to prove that he has really suffered damage is based upon an unreal comparison. He asks, in fact, to be placed in the same position as if he had sold his produce on the Irish market. In actual fact he carries on his activity as a cattle breeder in the United Kingdom and has sold his produce on the market there. If he had sold his produce on the Irish market, he would have been liable to the payment of monetary compensatory amounts on import into Ireland so that the prices obtained by him would in principle not have been different from those which he obtained by disposing of his produce on the United Kingdom market. If he had lived in Ireland, his produce would have been dependent upon the economic conditions for production prevailing in that State.

581 JUDGMENT OF 4. 3. 1980 — CASE 49/79 i2 It follows from the foregoing that the applicant has not been able to prove the existence of the damage which he claims to have suffered; this is sufficient for the dismissal of his application without there being any need to enter into the question of the lawfulness of the monetary measures criticized by the applicant.

Costs n Under Article 69 (2) of the Rules of Procedure of the Court of Justice the unsuccessful party must be ordered to pay the costs.

u Since the applicant has failed in his submissions, he must be ordered to pay the costs.

On those grounds,

THE COURT

hereby

1. Dismisses the application;

2. Orders the applicant to pay the costs.

Kutscher O'Keeffe Touffait Meitēns de Wilmars Pescatore

Mackenzie Stuart Bosco Koopmans Due

Delivered in open court in Luxembourg on 4 March 1980.

A. Van Houtte H. Kutscher

Registrar President

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