A Council Decision approving the conclusion of the Framework Agreement on Bananas between the Community and Costa Rica, Colombia, Nicaragua and Venezuela has been annulled by the Court of Justice to the extent that the Framework Agreement exempts certain operators from the export-licence system for which it provides.
Since 1 July 1993, Regulation (EEC) No 404/93 on the common organisation of the market in bananas has been in force. Amongst other measures, that regulation substituted a common regime governing trade with third countries for the various national regimes previously in force. In addition to setting an annual tariff quota for imports of third-country bananas and non-traditional ACP bananas(1) and levying customs duty on imports, it subdivides the tariff quota as follows: 66.5% to operators who previously marketed third-country and/or non-traditional ACP bananas (Category A operators), 30% to operators who marketed Community and/or traditional ACP bananas (Category B operators) and 3.5% to operators established in the Community who started marketing bananas other than Community and/or traditional ACP bananas from 1992 (Category C operators).
After the regulation had entered into force, the Latin American banana-producing countries concerned used the GATT dispute-settlement procedure to challenge the new Community banana import rules. The EC Commission reached an arrangement, however, with a number of the countries concerned (Costa Rica, Colombia, Nicaragua and Venezuela) in the form of a Framework Agreement. That Agreement increased the global tariff quota from 1994, reduced the rate of customs duty on imports under that quota and fixed the percentages of the quota allocated to each of those countries. Point 6 provides, inter alia, that ?the supplying countries with country quotas may deliver special export certificates for up to 70% of their quota, which, in turn, constitute a prerequisite for the issuance, by the Community, of certificates for the importation of bananas from said countries by "Category A" and "Category C" operators.' - in other words that Category A and C operators are subject to the export-licence system whilst Category B operators are exempted.
That Framework Agreement was incorporated into the Community's Uruguay Round Schedule, thus becoming part of the Agreement establishing the World Trade Organisation (the WTO). The Council approved the WTO Agreement by Decision of 22 December 1994.
In its action against the Council (which was supported by Spain, France and the Commission), the Federal Republic of Germany (which was supported by Belgium) asked the Court to annul that Council Decision to the extent that it thereby approved the conclusion of the Framework Agreement on Bananas between the Community and Costa Rica, Colombia, Nicaragua and Venezuela. Germany claimed that the regime introduced by the Framework Agreement impaired fundamental rights of Category A and C operators - their freedom to pursue a trade or business and their right to property - and discriminated against them as compared with Category B operators. It also argued that the Agreement contravened the principles of the protection of legitimate expectations and proportionality.
The Court of Justice dismisses all Germany's arguments - with one exception - as unfounded, referring principally to the reasoning in its judgment of 5 August 1994 in Case C-280/93 Germany v Council, concerning the common organisation of the market in bananas.
The Court takes the view that only the plea alleging breach of the general principle of non-discrimination is well founded as regards the exemption of Category B operators from the export-licence system provided for in the Framework Agreement.
It finds that the fact that some Community operators who have entered into commercial relations with third countries imports from which are subject to the export-licence system are under an obligation to obtain export licences, whilst others are exempt from that requirement, constitutes a difference in treatment. There is a clear difference in the treatment of Category A and C operators as compared with Category B operators, since application of the export-licence system to Category A and C operators means that they have to pay a price for bananas from the third countries concerned which is some 33% higher than that paid by Category B operators.
The Council and the Commission had argued that the difference in treatment was objectively justified by the need to restore the competitive balance between those categories of operators.
The Court, however, holds that the Council should have demonstrated that the balance disturbed by the increase in the tariff quota and the concomitant lowering of customs duties, which also benefit Category B operators, could be restored only by granting a substantial advantage to that same category of operators and, thus, at the cost of introducing a new difference in treatment detrimental to the other categories of operators who had already, when the tariff quota and the machinery for dividing it up were introduced, been subjected to similar restrictions and differences in treatment. The Council had not established that to be the case.
The Council had also expressly accepted that the introduction of the export-licence system was intended not only to reestablish a balance between the various categories of Community operators but also to provide financial aid for the third countries party to the Framework Agreement and thereby to offset the limitations which Regulation No 404/93 imposed on the marketing of bananas from those countries in favour of Community and ACP bananas. It did not, however, in the Court's finding, provide sufficient information to explain why the increase in the tariff quota and its division into country quotas, together with the concomitant lowering of customs duties, were not sufficient to offset the limitations which Regulation No 404/93 had imposed on the marketing of bananas from the third countries party to the Framework Agreement and why that objective had therefore to be achieved by the imposition of a financial burden on only some of the economic operators importing bananas from those countries.
The Court of Justice has therefore annulled the relevant part of the contested decision, to the extent that the Council thereby approved the Framework Agreement, in so far as that agreement exempts Category B operators from the export-licence system for which it provides.
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For the full text of the judgment, consult our Internet page http://curia.eu.int/ at around 3 pm today.
For further information, contact Tom Kennedy phone: (352) 4303 3355 fax: (352) 4303 2734
(1) Bananas from the African, Pacific and Caribbean countries having signed the Lomé Convention with the EC.