JUDGMENT OF THE COURT

16 June 1998 (1)

(EEC/Yugoslavia Cooperation Agreement — Suspension of trade concessions —Vienna Convention on the Law of Treaties — Rebus sic stantibus clause)

In Case C-162/96,

REFERENCE to the Court under Article 177 of the EC Treaty by theBundesfinanzhof for a preliminary ruling in the proceedings pending before thatcourt between

A. Racke GmbH & Co.

and

Hauptzollamt Mainz

on the validity of Council Regulation (EEC) No 3300/91 of 11 November 1991suspending the trade concessions provided for by the Cooperation Agreementbetween the European Economic Community and the Socialist Federal Republicof Yugoslavia (OJ 1991 L 315, p. 1),

THE COURT,

composed of: G.C. Rodríguez Iglesias, President, C. Gulmann, H. Ragnemalm andM. Wathelet (Presidents of Chambers), J.C. Moitinho de Almeida, P.J.G. Kapteyn(Rapporteur), J.L. Murray, D.A.O. Edward, G. Hirsch, P. Jann and L. Sevón,Judges,

Advocate General: F.G. Jacobs,

Registrar: D. Louterman-Hubeau, Principal Administrator,

after considering the written observations submitted on behalf of:

—    A. Racke GmbH & Co., by Dietrich Ehle, Rechtsanwalt, Cologne,

—    the Council of the European Union, by Jürgen Huber and MicailVitsentzatos, Legal Advisers, and by Antonio Tanca, of its Legal Service,acting as Agents,

—    the Commission of the European Communities, by Jörn Sack, LegalAdviser, and Barbara Brandtner, of its Legal Service, acting as Agents,

having regard to the Report for the Hearing,

after hearing the oral observations of A. Racke GmbH & Co., the Council and theCommission at the hearing on 15 July 1997,

after hearing the Opinion of the Advocate General at the sitting on 4 December1997,

gives the following

Judgment

1.

    By order of 7 March 1996, received at the Court on 13 May 1996, theBundesfinanzhof (Federal Finance Court) referred to the Court for a preliminaryruling under Article 177 of the EC Treaty two questions concerning the validity ofCouncil Regulation (EEC) No 3300/91 of 11 November 1991 suspending the tradeconcessions provided for by the Cooperation Agreement between the EuropeanEconomic Community and the Socialist Federal Republic of Yugoslavia (OJ 1991L 315, p. 1; 'the disputed regulation‘).

2.

    The questions were raised in proceedings between A. Racke GmbH & Co.('Racke‘) and the Hauptzollamt Mainz (Principal Customs Office, Mainz)concerning a customs debt arising on the importation into Germany of certainquantities of wine originating in the Socialist Federal Republic of Yugoslavia.

Legal background

3.

    The Cooperation Agreement between the European Economic Community and theSocialist Federal Republic of Yugoslavia ('the Cooperation Agreement‘) wassigned in Belgrade on 2 April 1980 by the Member States of the EuropeanEconomic Community and the Socialist Federal Republic of Yugoslavia('Yugoslavia‘) and approved on behalf of the Community by Council Regulation(EEC) No 314/83 of 24 January 1983 (OJ 1983 L 41, p. 1).

4.

    Article 22 of the Cooperation Agreement, as amended by Article 4 of theAdditional Protocol to that Agreement establishing new trade arrangements (the'Additional Protocol‘), approved on behalf of the Community by Council Decision87/605/EEC of 21 December 1987 (OJ 1987 L 389, p. 72), is worded as follows:

'1.    Customs duties on imports into the Community of wine of fresh grapesfalling within subheadings 22.05 C ex I or ex II of the Common Customs Tariffpresented in containers holding two litres or less, originating in Yugoslavia, shallbe reduced by 30% within the limits of an annual Community tariff quota of 12 000hectolitres. The Community shall apply the customs duties resulting from theprovisions of paragraph 4 to imports in excess of the quota.

...

3.    Paragraphs 1 and 2 shall remain in force until, under the progressivedismantling of customs duties referred to in paragraph 4, the levels of customsduties provided for in respect of wines referred to in paragraph 1 have beenreduced by 30% as provided for in paragraph 1.

4.    Customs duties on imports into the Community of wine of fresh grapesfalling within subheadings 22.05 C I or C II of the Common Customs Tariff,originating in Yugoslavia, shall be dismantled in accordance with the rules laiddown in Article 2(1) and (2) of the Additional Protocol establishing new tradearrangements. This provision shall apply within the limits of an annual Communitytariff quota of 545 000 hectolitres. The Community shall apply the duties of theCommon Customs Tariff to imports in excess of the quota.

...‘

5.

    Under Article 2(1) of the Additional Protocol, customs duties applicable under theAgreement to imports into the Community were to be progressively dismantledover the same periods and at the same rates as provided in the Act concerning theconditions of accession of the Kingdom of Spain and the Portuguese Republic andthe adjustments to the Treaties (OJ 1985 L 302, p. 23) in respect of imports intothe Community as constituted on 31 December 1985 of the same products fromthose countries. Where the level of customs duties in force for imports from Spain

into the Community as constituted on 31 December 1985 differed from that forimports from Portugal, products originating in Yugoslavia were to be subject to thehigher of the two rates. Under Article 2(2), where customs duty was lower forYugoslavia than for Spain, Portugal or both, the process of dismantling was tocommence once the duties on the same products from Spain and Portugal hadfallen below those applying to products originating in Yugoslavia.

6.

    Under Article 1 of Council Regulation (EEC) No 3413/90 of 19 November 1990opening and providing for the administration of Community tariff quotas for certainproducts originating in Yugoslavia (1991) (OJ 1990 L 335, p. 26), the customsduties applicable to imports into the Community of wine of fresh grapes fallingwithin CN codes ex 2204 21 and 2204 29 originating in Yugoslavia were suspendedfrom 1 January until 31 December 1991 at the levels of 3.6, 4.4, 4.8 or 5.6 ECU/hlwithin the limit of a tariff quota of 545 000 hl. Articles 2 to 4 of Regulation No3413/90 went on to lay down detailed rules for importers of the products inquestion to have access to the quota.

7.

    The Cooperation Agreement was concluded, according to Article 60 thereof, foran unlimited period. However, either party may denounce the Agreement bynotice to the other, the agreement ceasing to apply six months after suchnotification.

8.

    By Decision 91/586/ECSC, EEC of 11 November 1991 suspending the applicationof the Agreements between the European Community, its Member States and theSocialist Federal Republic of Yugoslavia (OJ 1991 L 315, p. 47), the Council andthe representatives of the Governments of the Member States, meeting within theCouncil, suspended the application of the Cooperation Agreement with immediateeffect, for the following reasons as set out in the second, third, fourth and fifthrecitals in the preamble to the decision:

'Whereas, in their declarations of 5 and 28 October 1991, the EuropeanCommunity and its Member States, meeting within the framework of EuropeanPolitical Cooperation, took note of the crisis in Yugoslavia; whereas the UnitedNations Security Council expressed, in resolution 713 (1991), the concern that theprolongation of this situation constituted a threat to international peace andsecurity;

Whereas the pursuit of hostilities and their consequences on economic and traderelations, both between the Republics of Yugoslavia and with the Community,constitute a radical change in the conditions under which the CooperationAgreement between the European Economic Community and the Socialist FederalRepublic of Yugoslavia and its Protocols, as well as the Agreement concerning theEuropean Coal and Steel Community, were concluded; whereas they call intoquestion the application of such Agreements and Protocols;

Whereas the appeal launched by the European Community and its Member States,meeting within the framework of European Political Cooperation on 6 October1991 at Haarzuilens, calling for compliance with the cease-fire agreement reachedin the Hague on 4 October 1991, has not been heeded;

Whereas, in the declaration of 6 October 1991, the European Community and itsMember States, meeting within the framework of European Political Cooperation,announced their decision to terminate the Agreements between the Communityand Yugoslavia should the agreement reached in the Hague on 4 October 1991between the parties to the conflict, in the presence of the President of the Councilof the European Communities and the President of the Conference on Yugoslavia,not be observed‘.

9.

    Under Article 1 of the disputed regulation, the trade concessions granted by orpursuant to the Cooperation Agreement were suspended. Under Article 3 thereof,it entered into force on the day of its publication in the Official Journal of theEuropean Communities, 15 November 1991.

10.

    The first, second, third and fourth recitals in the preamble to the regulationrepeated the reasons set out in the preamble to Decision 91/586, set out above.

11.

    In accordance with Article 60 of the Cooperation Agreement, the Council adoptedDecision 91/602/EEC of 25 November 1991 denouncing the CooperationAgreement between the European Economic Community and the Socialist FederalRepublic of Yugoslavia (OJ 1991 L 325, p. 23). Under Article 2 thereof, thatdecision, denouncing the Agreement and all related protocols and instruments, tookeffect on the day of its publication, 27 November 1991.

12.

    By Regulation (EEC) No 3567/91 of 2 December 1991 concerning thearrangements applicable to the import of products originating in the Republics ofBosnia-Herzegovina, Croatia, Macedonia and Slovenia (OJ 1991 L 342, p. 1), theCouncil granted to those republics in respect of certain products, amongst whichwines were not, however, included, the benefit of trading arrangements essentiallyequivalent to those in the Cooperation Agreement suspended by the Community.

13.

    Council Regulation (EEC) No 545/92 of 3 February 1992 concerning thearrangements applicable to the import into the Community of products originatingin the Republics of Croatia and Slovenia and the Yugoslav Republics ofBosnia-Herzegovina, Macedonia and Montenegro (OJ 1992 L 63, p. 1) maintainedthose measures for the year 1992 and extended them to certain agriculturalproducts, including wines of fresh grapes falling within CN codes ex 2204 21 or2204 29 originating in the republics concerned. Thus, Article 6 of Regulation No545/92 provided that, in respect of those wines, customs duties on importation wereto be reduced to the rate of 3.2 ECU/hl, within the limit of an annual quota of545 000 hl.

14.

    Under Article 1 of Council Regulation (EEC) No 547/92 of 3 February 1992opening and providing for the administration of Community tariff quotas for certainproducts originating in the Republics of Croatia and Slovenia and the YugoslavRepublics of Bosnia-Herzegovina, Macedonia and Montenegro (OJ 1992 L 63, p.41), the customs duties applicable to imports into the Community of wine of freshgrapes falling within CN codes ex 2204 21 and 2204 29 originating in thoserepublics were suspended from 1 January until 31 December 1992 at the levels of2.4, 2.9, 3.2 or 3.7 ECU/hl and within the limit of a quota of 545 000 hl. Articles2 to 4 of that regulation laid down detailed rules for importers of the products inquestion to have access to the quota.

The main proceedings

15.

    Between 6 November 1990 and 27 April 1992, Racke had wines it imported fromthe Kosovo wine-growing region cleared by customs in Germany for warehousingin its private customs warehouse. On 7 May 1992, it declared the consignmentsreleased into free circulation under the scheme of preferential rates of customsduties provided for in the Cooperation Agreement.

16.

    Nevertheless, by a decision of 27 May 1992, the Hauptzollamt Mainz demanded thedifference between the third-country rate of customs duty and the preferential rate,since the wines had been imported from Serbia.

17.

    Racke then brought an action challenging that decision before the Finanzgericht(Finance Court), which upheld it in respect of wines imported before 15 November1991, but dismissed it as to the remainder on the ground that the suspension by thedisputed regulation of the trade concessions granted by the Cooperation Agreementwas justified by the occurrence of a fundamental change in the situation, namelythe war in Yugoslavia.

18.

    Racke has appealed on a point of law against that decision to the Bundesfinanzhof,which first considers the question whether unilateral suspension of the CooperationAgreement complies with the conditions laid down in Article 62(1) of the ViennaConvention on the Law of Treaties of 23 May 1969 (the 'Vienna Convention‘).

19.

    Article 62 of the Vienna Convention provides:

'1.    A fundamental change of circumstances which has occurred with regard tothose existing at the time of the conclusion of a treaty, and which was notforeseen by the parties, may not be invoked as a ground for terminating orwithdrawing from the treaty unless:

    (a)    the existence of those circumstances constituted an essential basis ofthe consent of the parties to be bound by the treaty; and

    (b)    the effect of the change is radically to transform the extent ofobligations still to be performed under the treaty.

...

3.    If, under the foregoing paragraphs, a party may invoke a fundamentalchange of circumstances as a ground for terminating or withdrawing froma treaty it may also invoke the change as a ground for suspending theoperation of the treaty.‘

20.

    In the view of the national court, the break-up of Yugoslavia into several newStates and the hostilities within Yugoslavia, which were factors to be regarded asa political change, involved a fundamental change in the material circumstancesunderlying the consent of the contracting parties bound by the CooperationAgreement. On the other hand, the change did not appear radically to havealtered the extent of the obligations under the Cooperation Agreement, which wasessentially an economic agreement.

21.

    The Bundesfinanzhof then considers whether, having regard to Article 65 of theVienna Convention, it was permissible to proceed with the suspension of theCooperation Agreement with no prior notification or waiting period, if there wasespecial urgency and the lapse of time before payment of the customs duties inquestion was sufficient to compensate for any procedural defects.

22.

    Article 65(1) of the Vienna Convention provides that a party which, under theprovisions of the Convention, invokes a reason for terminating, withdrawing fromor suspending the operation of a treaty must notify the other parties. Thatnotification is to indicate the measure proposed to be taken with respect to thetreaty and the reasons therefor. Article 65(2) of the Vienna Convention furtherprovides that if, after the expiry of a period which, except in cases of specialurgency, is to be not less than three months after the receipt of the notification, noparty has raised any objection, the party making the notification may carry out inthe manner provided in Article 67 the measure which it has proposed. Article65(3) of the Vienna Convention provides that, if an objection has been raised byanother party, the parties must seek a solution through the means indicated inArticle 33 of the Charter of the United Nations.

23.

    In the light of those considerations, the Bundesfinanzhof decided to stay theproceedings and refer the following questions to the Court of Justice for apreliminary ruling:

'1. Is Council Regulation (EEC) No 3300/91 of 11 November 1991 suspending thetrade concessions provided for by the Cooperation Agreement between theEuropean Economic Community and the Socialist Federal Republic of Yugoslavia(OJ 1991 L 315, p. 1) valid?

2. If not, what are the consequences of invalidity as regards customs duty chargedin early May 1992 on wines originating in Serbia which were imported betweenmid-November 1991 and April 1992 and cleared for warehousing in a customswarehouse?

Are the quota-related preferential customs duties granted in 1992 for wines fromthe territory of the former Yugoslavia other than Serbia applicable in thatrespect?‘

Question 1

24.

    By way of a preliminary observation, it should be noted that even though theVienna Convention does not bind either the Community or all its Member States,a series of its provisions, including Article 62, reflect the rules of international lawwhich lay down, subject to certain conditions, the principle that a change ofcircumstances may entail the lapse or suspension of a treaty. Thus theInternational Court of Justice held that '[t]his principle, and the conditions andexceptions to which it is subject, have been embodied in Article 62 of the ViennaConvention on the Law of Treaties, which may in many respects be considered asa codification of existing customary law on the subject of the termination of a treatyrelationship on account of change of circumstances‘ (judgment of 2 February 1973,Fisheries Jurisdiction (United Kingdom v Iceland), ICJ Reports 1973, p. 3, paragraph36).

The jurisdiction of the Court

25.

    The Commission has expressed doubts as to the jurisdiction of the Court to ruleon the first question because it relates to the validity of the disputed regulationunder rules of customary international law. Even though the regulation constitutesan act of the Community within the meaning of subparagraph (b) of the firstparagraph of Article 177 of the Treaty, the preliminary rulings procedure does notpermit the development of an argument based on international law alone, and inparticular on the principles governing the termination of treaties and the suspensionof their operation.

26.

    As the Court has already held in Joined Cases 21/72 to 24/72 International FruitCompany v Produktschap voor Groenten en Fruit [1972] ECR 1219, paragraph 5, thejurisdiction of the Court to give preliminary rulings under Article 177 of the Treatyconcerning the validity of acts of the Community institutions cannot be limited bythe grounds on which the validity of those measures may be contested.

27.

    Since such jurisdiction extends to all grounds capable of invalidating thosemeasures, the Court is obliged to examine whether their validity may be affectedby reason of the fact that they are contrary to a rule of international law(International Fruit Company, paragraph 6).

28.

    The Court therefore has jurisdiction to rule on the first question.

The validity of the disputed regulation

29.

    It should be noted that the question whether the disputed regulation is valid havingregard to customary international law has arisen incidentally in a dispute in whichRacke claims that the preferential rates of customs duty provided for in Article 22of the Cooperation Agreement should be applied.

30.

    It therefore needs to be examined first whether Article 22(4), which, as the purposeof the quota regulations cited in the order for reference demonstrates, applies tothe main proceedings in this case, is capable of conferring rights to preferentialcustoms treatment directly upon individuals.

31.

    The Court has consistently held that a provision of an agreement concluded by theCommunity with non-member countries must be regarded as being directlyapplicable when, regard being had to its wording and the purpose and nature of theagreement itself, the provision contains a clear and precise obligation which is notsubject, in its implementation or effects, to the adoption of any subsequent measure(see, in particular, Case 12/86 Demirel v Stadt Schwäbisch Gmünd [1987] ECR3719, paragraph 14).

32.

    In order to determine whether the provision contained in Article 22(4) of theCooperation Agreement meets those criteria, it is necessary first to examine itswording.

33.

    By its very wording, that provision requires Community measures to implement itin order to enable the annual Community tariff quota to be opened in accordancewith the detailed rules laid down by Article 2(1) and (2) of the Additional Protocol,the Community having no discretion as to the adoption of those measures. TheCommunity is obliged to carry out, within a certain period, an exact calculation ofcustoms duties in accordance with those provisions.

34.

    It follows that, as regards the preferential customs treatment for which it makesprovision, Article 22(4) of the Cooperation Agreement is capable of conferringrights upon which individuals may rely before national courts.

35.

    That finding is, moreover, borne out by examination of the purpose and nature ofthe agreement of which Article 22(4) forms part.

36.

    The aim of the Cooperation Agreement is to promote the development of tradebetween the contracting parties and progressively to remove barriers affecting thebulk of their trade. After the end of the first stage of that liberalisation, on 30June 1985, the Additional Protocol established the further trade arrangements. It

is in that context that Article 22(4), as amended by Article 4 of the AdditionalProtocol, lays down in respect of certain wines a Community tariff quota withinwhich dismantling of customs duties on importation into the Community is to takeplace.

37.

    It next needs to be examined whether, when invoking in legal proceedings thepreferential customs treatment granted to him by Article 22(4) of the CooperationAgreement, an individual may challenge the validity under customary internationallaw rules of the disputed regulation, suspending the trade concessions grantedunder that Agreement as from 15 November 1991.

38.

    In that respect, the Council maintains that the adoption of the disputed regulationwas preceded, logically and legally, by the adoption of Decision 91/586, suspendingthe application of the Cooperation Agreement on the international level. Adoptionof the disputed regulation became necessary in its turn, since the trade concessionsprovided for in the Agreement had been implemented in the past by an internalCommunity regulation.

39.

    The Council submits that, since international law does not prescribe the remediesfor breach of its rules, the possible breach of those rules by Decision 91/586 doesnot necessarily lead to the restoration in force of the Cooperation Agreement andhence, at the Community level, to the invalidity of the disputed regulation byreason of its being contrary to the restored Agreement. Breach of international lawmight for instance also be penalised by means of damages, leaving the CooperationAgreement suspended. The Council therefore argues that, in assessing the validityof the disputed regulation, the Court does not need to examine whether suspensionof the Cooperation Agreement by Decision 91/586 infringed rules of internationallaw.

40.

    It is important to note at the outset that the question referred by the national courtconcerns only the validity of the disputed regulation under rules of customaryinternational law.

41.

    As far as the Community is concerned, an agreement concluded by the Councilwith a non-member country in accordance with the provisions of the EC Treaty is an act of a Community institution, and the provisions of such an agreement forman integral part of Community law (see Demirel, cited above, paragraph 7).

42.

    If, therefore, the disputed regulation had to be declared invalid, the tradeconcessions granted by the Cooperation Agreement would remain applicable inCommunity law until the Community brought that Agreement to an end inaccordance with the relevant rules of international law.

43.

    It follows that a declaration of the invalidity of the disputed regulation by reasonof its being contrary to rules of customary international law would allow individuals

to rely directly on the rights to preferential treatment granted to them by theCooperation Agreement.

44.

    For its part, the Commission doubts whether, in the absence of an express clausein the EC Treaty, the international law rules referred to in the order for referencemay be regarded as forming part of the Community legal order. Thus, in order tochallenge the validity of a regulation, an individual might rely on grounds based onthe relationship between him and the Community, but does not, the Commissionargues, have the right to rely on grounds deriving from the legal relationshipbetween the Community and a non-member country, which fall within the scopeof international law.

45.

    It should be noted in that respect that, as is demonstrated by the Court's judgmentin Case C-286/90 Poulsen and Diva Navigation [1992] ECR I-6019, paragraph 9, theEuropean Community must respect international law in the exercise of its powers. It is therefore required to comply with the rules of customary international lawwhen adopting a regulation suspending the trade concessions granted by, or byvirtue of, an agreement which it has concluded with a non-member country.

46.

    It follows that the rules of customary international law concerning the terminationand the suspension of treaty relations by reason of a fundamental change ofcircumstances are binding upon the Community institutions and form part of theCommunity legal order.

47.

    In this case, however, the plaintiff is incidentally challenging the validity of aCommunity regulation under those rules in order to rely upon rights which itderives directly from an agreement of the Community with a non-member country. This case does not therefore concern the direct effect of those rules.

48.

    Racke is invoking fundamental rules of customary international law against thedisputed regulation, which was taken pursuant to those rules and deprives Rackeof the rights to preferential treatment granted to it by the Cooperation Agreement(for a comparable situation in relation to basic rules of a contractual nature, seeCase C-69/89 Nakajima v Council [1991] I-2069, paragraph 31).

49.

    The rules invoked by Racke form an exception to the pacta sunt servanda principle,which constitutes a fundamental principle of any legal order and, in particular, theinternational legal order. Applied to international law, that principle requires thatevery treaty be binding upon the parties to it and be performed by them in goodfaith (see Article 26 of the Vienna Convention).

50.

    The importance of that principle has been further underlined by the InternationalCourt of Justice, which has held that 'the stability of treaty relations requires thatthe plea of fundamental change of circumstances be applied only in exceptional

cases‘ (judgment of 25 September 1997, Gabcíkovo-Nagymaros Project (Hungary vSlovakia), at paragraph 104, not yet published in the ICJ Reports).

51.

    In those circumstances, an individual relying in legal proceedings on rights whichhe derives directly from an agreement with a non-member country may not bedenied the possibility of challenging the validity of a regulation which, bysuspending the trade concessions granted by that agreement, prevents him fromrelying on it, and of invoking, in order to challenge the validity of the suspendingregulation, obligations deriving from rules of customary international law whichgovern the termination and suspension of treaty relations.

52.

    However, because of the complexity of the rules in question and the imprecisionof some of the concepts to which they refer, judicial review must necessarily, andin particular in the context of a preliminary reference for an assessment of validity,be limited to the question whether, by adopting the suspending regulation, theCouncil made manifest errors of assessment concerning the conditions for applyingthose rules.

53.

    For it to be possible to contemplate the termination or suspension of an agreementby reason of a fundamental change of circumstances, customary international law,as codified in Article 62(1) of the Vienna Convention, lays down two conditions. First, the existence of those circumstances must have constituted an essential basisof the consent of the parties to be bound by the treaty; secondly, that change musthave had the effect of radically transforming the extent of the obligations still to beperformed under the treaty.

54.

    Concerning the first condition, the preamble to the Cooperation Agreement statesthat the contracting parties are resolved 'to promote the development anddiversification of economic, financial and trade cooperation in order to foster abetter balance and an improvement in the structure of their trade and expand itsvolume and to improve the welfare of their populations‘ and that they areconscious 'of the need to take into account the significance of the new situationcreated by the enlargement of the Community for the organisation of moreharmonious economic and trade relations between the Community and the SocialistFederal Republic of Yugoslavia‘. Pursuant to those considerations, Article 1 of theAgreement provides that its object 'is to promote overall cooperation between thecontracting parties with a view to contributing to the economic and socialdevelopment of the Socialist Federal Republic of Yugoslavia and helping tostrengthen relations between the parties‘.

55.

    In view of such a wide-ranging objective, the maintenance of a situation of peacein Yugoslavia, indispensable for neighbourly relations, and the existence ofinstitutions capable of ensuring implementation of the cooperation envisaged by theAgreement throughout the territory of Yugoslavia constituted an essential conditionfor initiating and pursuing that cooperation.

56.

    Regarding the second condition, it does not appear that, by holding in the secondrecital in the preamble to the disputed regulation that 'the pursuit of hostilities andtheir consequences on economic and trade relations, both between the Republicsof Yugoslavia and with the Community, constitute a radical change in theconditions under which the Cooperation Agreement between the EuropeanEconomic Community and the Socialist Federal Republic of Yugoslavia and itsProtocols ... were concluded‘ and that 'they call into question the application ofsuch Agreements and Protocols‘, the Council made a manifest error of assessment.

57.

    Whilst it is true, as Racke argues, that a certain volume of trade had to continuewith Yugoslavia and that the Community could have continued to grant tariffconcessions, the fact remains, as the Advocate General has pointed out inparagraph 93 of his Opinion, that application of the customary international lawrules in question does not require an impossibility to perform obligations, and thatthere was no point in continuing to grant preferences, with a view to stimulatingtrade, in circumstances where Yugoslavia was breaking up.

58.

    As for the question raised in the order for reference whether, having regard toArticle 65 of the Vienna Convention, it was permissible to proceed with thesuspension of the Cooperation Agreement with no prior notification or waitingperiod, this Court observes that, in the joint statements of 5, 6 and 28 October1991, the Community and the Member States announced that they would adoptrestrictive measures against those parties which did not observe the ceasefireagreement of 4 October 1991 which they had signed in the presence of thePresident of the Council and the President of the Conference on Yugoslavia;moreover, the Community had made known during the conclusion of thatagreement that it would bring the Cooperation Agreement to an end in the eventof the ceasefire not being observed (Bull. EC 10-1991, paragraphs 1.4.6, 1.4.7 and1.4.16).

59.

    Even if such declarations do not satisfy the formal requirements laid down byArticle 65 of the Vienna Convention, it should be noted that the specific proceduralrequirements there laid down do not form part of customary international law.

60.

    Examination of the first question has thus disclosed no factor of such a kind as toaffect the validity of the suspending regulation.

61.

    Given the reply to the first question referred, there is no need to adjudicate on thesecond.

Costs

62.

    The costs incurred by the Council and the Commission, which have submittedobservations to the Court, are not recoverable. Since these proceedings are, for theparties to the main proceedings, a step in the proceedings pending before thenational court, the decision on costs is a matter for that court.

On those grounds,

THE COURT,

in answer to the questions referred to it by the Bundesfinanzhof by order of 7March 1996, hereby rules:

Examination of the questions referred has disclosed no factor of such a kind as toaffect the validity of Council Regulation (EEC) No 3300/91 of 11 November 1991suspending the trade concessions provided for by the Cooperation Agreementbetween the European Economic Community and the Socialist Federal Republicof Yugoslavia.

Rodríguez IglesiasGulmann Ragnemalm Wathelet                Moitinho de Almeida Kapteyn Murray                    Edward Hirsch Jann Sevón

Delivered in open court in Luxembourg on 16 June 1998.

R. Grass

G.C. Rodríguez Iglesias

Registrar

President

1: Language of the case: German.