JUDGMENT OF THE COURT OF FIRST INSTANCE (Second Chamber)

28 April 1998 (1)

(Non-contractual liability for an unlawful act — Regulation

No 2340/90— Embargo on trade with Iraq — Impairment of rights

equivalent to expropriation — Liability for an unlawful act — Damage)

In Case T-184/95,

Dorsch Consult Ingenieurgesellschaft mbH, a company incorporated underGerman law, established in Munich (Germany), represented by Professor Karl M.Meessen, with an address for service in Luxembourg at the chambers of PatrickKinsch, 100 Boulevard de la Pétrusse,

applicant,

v

Council of the European Union, represented initially by Yves Cretien, LegalAdviser, then by Stephan Marquardt and Antonio Tanca, of its Legal Service,acting as Agents, with an address for service in Luxembourg at the Office ofAlessandro Morbilli, Director-General of the Legal Directorate of the EuropeanInvestment Bank, 100 Boulevard Konrad Adenauer,

and

Commission of the European Communities, represented by Peter Gilsdorf andAllan Rosas, Principal Legal Advisers, and Jörn Sack, Legal Adviser, acting asAgents, with an address for service in Luxembourg at the office of Carlos Gómezde la Cruz, of its Legal Service, Wagner Centre, Kirchberg,

defendants,

APPLICATION for compensation for the damage allegedly suffered by theapplicant as a result of the adoption of Council Regulation (EEC) No 2340/90 of8 August 1990 preventing trade by the Community as regards Iraq and Kuwait (OJ1990 L 213, p. 1),

THE COURT OF FIRST INSTANCE

OF THE EUROPEAN COMMUNITIES (Second Chamber),

composed of: C.W. Bellamy, President, A. Kalogeropoulos and V. Tiili, Judges,

Registrar: H. Jung,

having regard to the written procedure and further to the hearing on 19 June 1997,

gives the following

Judgment

Facts

1.

    The applicant, Dorsch Consult Ingenieurgesellschaft mbH, is a German limitedcompany established in Munich (Germany) whose principal activity is engineeringconsultancy in various countries.

2.

    On 30 January 1975 the applicant concluded with the Ministry of Works andHousing of the Republic of Iraq (hereinafter 'the Iraqi Ministry‘) a contract forservices relating to the organisation and supervision of works on the constructionof Iraqi Expressway No. 1. The contract, which was for a minimum period of sixyears, was subsequently renewed several times for the purposes of execution andsupervision of the abovementioned works. Article X of the contract provided interalia that, in the event of differences arising as to the interpretation of the contractor non-performance of contractual obligations, the contracting parties were toendeavour to find an acceptable solution by conciliation (Article X(1)). In theevent of the differences persisting, the matter was to be referred to the PlanningBoard, whose decision would be final and binding. However, no decision taken in

relation to the contract could prevent the contracting parties from bringing adispute before the competent Iraqi courts (Article X(2)).

3.

    According to the documents before the Court, outstanding debts owed to theapplicant by the Iraqi authorities at the beginning of 1990 for services renderedunder the abovementioned contract were acknowledged in two letters, dated 5 and6 February 1990, from the Iraqi Ministry to an Iraqi bank, Rafidian Bank, directingit to transfer the sums due to the applicant to the latter's bank account.

4.

    On 2 August 1990 the United Nations Security Council adopted Resolution No 660(1990) to the effect that there had been a breach of international peace andsecurity resulting from Iraq's invasion of Kuwait and that Iraqi forces shouldwithdraw immediately and unconditionally from the territory of Kuwait.

5.

    On 6 August 1990 the United Nations Security Council adopted Resolution No 661(1990) in which, declaring that it was 'mindful of its responsibilities under theCharter of the United Nations for the maintenance of international peace andsecurity‘ and noting that the Republic of Iraq (hereinafter 'Iraq‘) had notcomplied with Resolution No 660 (1990), decided to impose an embargo on tradewith Iraq and Kuwait.

6.

    On 8 August 1990 the Council, referring to the 'serious situation resulting from theinvasion of Kuwait by Iraq‘ and to United Nations Security Council Resolution No661 (1990), adopted, on a proposal from the Commission, Council Regulation(EEC) No 2340/90 of 8 August 1990 preventing trade by the Community as regardsIraq and Kuwait (OJ 1990 L 213, p. 1, hereinafter 'Regulation No 2340/90‘).

7.

    Article 1 of Regulation No 2340/90 prohibits as from 7 August 1990 theintroduction into the territory of the Community of all commodities or productsoriginating in, or coming from, Iraq or Kuwait and the export to those countries ofall commodities or products originating in, or coming from, the Community. Article2 of the same regulation prohibits as from 7 August 1990 (a) all activities orcommercial transactions, including all operations connected with transactions whichhave already been concluded or partially carried out, the object or effect of whichis to promote the export of any commodity or product originating in, or comingfrom, Iraq or Kuwait; (b) the sale or supply of any commodity or product, whereverit originates or comes from, to any natural or legal person in Iraq or Kuwait or toany other natural or legal person for the purposes of any commercial activitycarried out in or from the territory of Iraq or Kuwait; and (c) any activity theobject or effect of which is to promote such sales or supplies.

8.

    According to the documents before the Court, on 16 September 1990 the 'HigherRevolutionary Council of the Republic of Iraq‘, referring to 'arbitrary decisions bycertain governments‘, adopted with retroactive effect from 6 August 1990 Law No57 on protection of Iraqi property, interests and rights in Iraq and elsewhere

(hereinafter 'Law No 57‘). Article 7 of that Law froze all property and assets andincome from them held at the material time by the governments, undertakings,companies and banks of those States which had adopted 'arbitrary decisions‘against Iraq.

9.

    Not having received payment from the Iraqi authorities of the sums acknowledgedas due in the abovementioned letters of 5 and 6 February 1990 from the IraqiMinistry (see paragraph 3 above), the applicant, by letters of 4 August 1995, askedthe Council and the Commission to compensate it for the damage suffered as aresult of those debts having become irrecoverable through application of Law No57, since that Law had been adopted in response to the adoption by theCommunity of Regulation No 2340/90. In those letters, the applicant claimed thatthe Community legislature was under an obligation to compensate operatorsaffected by the embargo imposed on trade with Iraq and that the failure to do sorendered the Community liable under the second paragraph of Article 215 of theEC Treaty. It added that, as a precaution, it had registered its claims against Iraqwith the United Nations Iraq Claims Compensation Commission.

10.

    By letter dated 20 September 1995 the Council refused to grant the applicant'srequest for compensation.

11.

    In those circumstances the applicant, by application lodged at the Registry of theCourt of First Instance on 6 October 1995, brought the present action.

12.

    Upon hearing the report of the Judge-Rapporteur, the Court of First Instance(Second Chamber) decided to open the oral procedure without any preparatoryinquiry. However, by way of measures of organisation of procedure, the partieswere requested to reply to a number of written questions.

13.

    The parties presented oral argument and replied to questions put to them orallyby the Court at the public hearing on 19 June 1997.

Forms of order sought

14.

    The applicant claims that the Court of First Instance should:

—    Order the Community to pay it DM 2 279 859.69, plus interest at the rateof 8% per annum as from 9 August 1990, against assignment to theCommunity of the balance of the applicant's claim in the same amountagainst Iraq;

—    Order the defendants to pay the costs;

—    Declare the judgment enforceable;

—    In the alternative, declare the judgment provisionally enforceable againstpresentation of a bank guarantee.

15.

    The Council contends that the Court of First Instance should:

—    Declare the application inadmissible;

—    Otherwise, dismiss it as unfounded;

—    Order the applicant to pay the costs.

16.

    The Commission contends that the Court of First Instance should:

—    Dismiss the application as unfounded;

—    Order the applicant to pay the costs.

Admissibility

Pleas in law and arguments of the parties

17.

    The Council, without formally raising an objection of inadmissibility under Article114(1) of the Rules of Procedure, maintains that the application is inadmissiblebecause the Community cannot incur liability for the damage allegedly suffered bythe applicant (Case 99/74 Grands Moulins des Antilles v Commission [1975] ECR1531).

18.

    First, the Council maintains that the alleged damage was caused not by RegulationNo 2340/90 but by Law No 57. Contrary to the applicant's assertion, the adoptionof that Law was not a 'direct reaction‘ to the adoption of Regulation No 2340/90but, as is clear from its preamble, a reaction to the 'arbitrary decisions‘ taken by'certain governments‘. According to the Council, it was United Nations SecurityCouncil Resolutions Nos 660 (1990) and 661 (1990) which in fact prompted theadoption of Law No 57. In those circumstances, the fact that the embargo orderedby the United Nations Security Council against Iraq was justified by Iraq's illegalconduct (the invasion of Kuwait) means that no objective connection can beestablished between the adoption of Regulation No 2340/90 and the adoption byIraq, as a counter-measure, of Law No 57 and, therefore, there can be no causallink between the Community regulation and the damage alleged by the applicant.

19.

    Second, the Council questions whether the applicant's claims against the Iraqiauthorities constitute 'assets‘ frozen by virtue of Article 7 of Law No 57 (seeparagraph 8 above). In particular, the applicant has not shown that it was pursuantto Law No 57 that Rafidian Bank refused to execute the transfer orders given by

the Iraqi Ministry. The Council states that the transfer orders in question weregiven by letter from the Iraqi Ministry dated 5 and 6 February 1990 — well beforethe adoption of Law No 57 in September 1990.

20.

    Third, the Council maintains that, even if the Iraqi authorities' refusal to honourtheir debts to the applicant was based on Law No 57, only that Law, in the absenceof any national or Community measure prohibiting the transfer of funds toGermany from Iraq, gave rise to the damage alleged by the applicant. Theapplicant's situation is thus different from that of other German operators whosuffered losses as a result of German national measures prohibiting, inimplementation of Regulation No 2340/90, any commercial dealings with Iraq.

21.

    The Commission, for its part, considers that, in principle, there is no basis in thecase-law of the Court of Justice on non-contractual liability for an action underArticle 178 and the second paragraph of Article 215 of the Treaty to establish non-contractual liability on the part of the Community for a lawful act. However, itconsiders that there must a legal basis in the Treaty on which an individual mayrely to establish liability on the part of the Community for a lawful act.

22.

    The applicant maintains that its application is admissible and that theconsiderations of fact and law put forward by the Council, in particular thoserelating to the absence of any causal link between the adoption of Regulation No2340/90 and the impossibility of its recovering its debts from the Iraqi authorities,relate to the substance rather than to the admissibility of the application.

Findings of the Court

23.

    The Court observes that the applicant clearly describes in its application the natureand extent of the alleged damage and the reasons for which it considers that thereis a causal link between that damage and the adoption of Regulation No 2340/90. The application thus contains sufficient information to satisfy the admissibilityrequirements laid down in that regard by Article 44(1)(c) of the Rules of Procedureand by the case-law: the Council's arguments concerning the existence and natureof the alleged damage and the causal link go to the substance of the applicationand should therefore be examined in relation thereto. It follows that theapplication must be declared admissible (Case T-554/93 Saint and Murray v Counciland Commission [1997] ECR II-563, paragraph 59, and Case T-38/96 GuérinAutomobiles v Commission [1997] ECR II-1223, paragraph 42).

Substance

24.

    The applicant maintains that, in so far as the origin of Law No 57 is to be foundin the adoption of Regulation No 2340/90, which imposed an embargo on tradewith Iraq, the Community is required to compensate it for the damage sustained

as a result of the Iraqi authorities' refusal to honour their debts to the applicant. It submits that the Community's liability for the damage thus sustained necessarilyarises by virtue of the principle of Community liability for lawful acts, in that itsuffered an impairment of its property rights equivalent to expropriation, or, in thealternative, by virtue of the principle of Community liability for unlawful acts, theillegality in question stemming in this case from the Community legislature's failureto provide, when adopting Regulation No 2340/90, for compensation for thedamage caused by that regulation to the undertakings concerned.

The Community's liability for lawful acts

Arguments of the parties

The basis of the Community's liability for lawful acts

25.

    The applicant maintains, first, that in accordance with the first paragraph of Article1 of the First Additional Protocol to the European Convention for the Protectionof Human Rights and Fundamental Freedoms (hereinafter 'the Human RightsConvention‘) and the general principles of international law relating to theobligation to compensate for damage to property, Paragraph 14(3) of theGrundgesestz (German Basic Law) provides that expropriation decided upon in thegeneral interest can be effected only against payment of compensation. Accordingto the applicant, the same rule also applies in cases of 'an impairment equivalentto expropriation‘ where, under German case-law, there is an obligation to paycompensation when lawful State acts, although not constituting formal expropriationmeasures, nevertheless have the incidental consequence of adversely affectingproperty rights.

26.

    Moreover, according to settled case-law of the European Court of Human Rights,debts receivable fall within the concept of property protected against impairmentequivalent to expropriation under Article 1 of the First Protocol to the HumanRights Convention (judgment of the European Court of Human Rights of 9December 1994 in the case of Greek Refineries Stan and Stratis Andreadis v Greece). The same approach is also taken in the case-law on public international law andin the laws of the Member States.

27.

    On the basis of those considerations, the applicant maintains that the fact that itsexisting and uncontested claims became irrecoverable as a result of the applicationof Law No 57, adopted in retaliation for the imposition of an embargo on tradewith Iraq by Regulation No 2340/90, caused it a 'still subsisting injury‘ which mustbe redressed by the Community.

28.

    It maintains that its claim for compensation for lawful impairment of its propertyrights is justified by the consideration that its contribution to the political costs of

the embargo applied by the Community should not be greater than that of theother Community taxpayers who must likewise bear those costs in accordance withthe principle of equal treatment (Case 265/78 Ferwerda v Produktschap voor Vee enVlees [1980] ECR 617, at 628).

29.

    In response to the defendants' argument that this case is concerned with aCommunity measure reflecting economic policy choices, with the result that thedamage alleged by it does not exceed the limits of the risks inherent in economicactivity in the field concerned and does not threaten its existence as an undertaking,the applicant states that the question whether the embargo imposed on trade withIraq is a measure of economic policy or of security policy, threatening its existence,is irrelevant since this case is concerned not with future financial losses but with theimpairment of pre-existing property rights. As to whether, by providing services inIraq, it knowingly took the risk of being unable subsequently to recover its debts,it states that the contract which it concluded with the Iraqi authorities in 1975predates by four years the establishment of the present Iraqi regime and by fiveyears the war between Iraq and Iran.

30.

    The Council maintains, first, that the conditions for the Community to incur liabilityas the result of a lawful act must be stricter than those applicable to liability for anunlawful act.

31.

    It observes that, according to the relevant case-law, strict liability can be incurredonly if an individual has to bear, in the public interest, a financial burden whichwould not normally fall upon him (Case 267/82 Développement SA and Clemessy vCommission [1986] ECR 1907) or if a particular group of undertakings specialisingin certain products has to bear a disproportionate part of the burden deriving fromthe adoption by the Community of certain economic measures (Case 81/86 De BoerBuizen v Council and Commission [1987] ECR 3677).

32.

    However, according to the Council, none of those conditions is satisfied in this case. In response to the applicant's statement that it is unacceptable for it to contributemore than other economic operators to the costs of the policy of embargoing tradewith Iraq, merely because its claims remained outstanding when that policy wasimplemented, the Council replies that it is not for the Community to makereparation for 'mishaps‘ befalling operators engaging in transactions involvingeconomic risks.

33.

    The Commission contends that the German legal concept of 'exceptional sacrifice‘('Sonderopfer‘), on which the applicant bases its claim for compensation,presupposes that an individual has suffered particular damage and is nottransposable, as such, into Community law. Moreover, it is doubtful whether theapplicant can be regarded as forming part of a sufficiently well-defined group ofundertakings which has made an 'exceptional sacrifice‘ of the kind referred to.

34.

    The Commission emphasises that the applicant's references to German case-lawconcern adverse effects on real estate or commercial property resulting from theadoption of State measures relating to building or reparcelling of land and are nottherefore relevant to the present case. Similarly, the case-law of the EuropeanHuman Rights Court on protection of property rights cited by the applicant (seeparagraph 29 above) in fact concerns direct deprivation of ownership by acts of thepublic authorities and not the indirect consequences of lawful legal measuresadopted by the Community, as in this case.

35.

    Moreover, as is clear from the relevant case-law, the Community's liability inrespect of lawful acts can be incurred only if the damage alleged was notforeseeable or could not be avoided by a diligent economic operator. However, theforeseeability of Iraq's insolvency and/or its refusal to pay its debts was manifest inthis case, having regard, first, to the surrounding circumstances in general and,second, to the particular situation prevailing in that country. According to theCommission, undertakings like the applicant, which had been unable to obtainguarantees from public bodies or insurance companies to cover risks associatedwith commercial transactions with countries considered as 'high-risk countries‘,merely accepted, in full knowledge, the increased risks involved.

36.

    Finally, the applicant has not mentioned any circumstance liable seriously to affectits functioning and threaten its survival as an undertaking (see the Opinion ofAdvocate General Lenz in Joined Cases 279/84, 280/84, 285/84 and 286/84 Rau andOthers v Commission [1987] ECR 1084, at 1114).

The causal link

37.

    The applicant maintains that the alleged damage was caused by the adoption ofRegulation No 2340/90 which imposed an embargo on trade with Iraq, since theIraqi authorities' refusal to settle its claims was based on Law No 57, a measureadopted in response to the adoption of that regulation. Contrary to the Council'scontention, Iraq's adoption of Law No 57 is not a 'remote‘ consequence withinthe meaning of the case-law (Joined Cases 64/76, 113/76, 167/78, 239/78, 27/79,28/79 and 45/79 Dumortier Frères v Council [1979] ECR 3091) but a typical andforeseeable consequence of an act applying an embargo.

38.

    In that regard, the applicant maintains that when Regulation No 2340/90 wasadopted both the Commission and the Council in fact took account of the costs andother consequences of the possibility of Iraq's suspending payment of itsoutstanding debts to Community undertakings. In support of that assertion, it citesas witnesses the former President of the Commission, Mr Delors, and the formerPresident of the Council, Mr De Michelis, and asks the Court of First Instance toorder the Council and the Commission to produce all the documents leading to the

adoption of Regulation No 2340/90 (Case T-194/94 Carvel and GuardianNewspapers v Council [1995] ECR II-2765).

39.

    According to the applicant, the defendants' argument that the alleged damage isattributable not to the adoption of Regulation No 2340/90 but solely to the factthat, before the adoption of that regulation and even before the invasion of Kuwaiton 2 August 1990, Iraq was not in a position to pay its debts, is belied by the factthat, in April and May 1990, the Iraqi authorities had already paid it a sum ofabout DM 200 000 for services rendered. Similarly, the Iraqi authorities‘ delay insettling various invoices in foreign currency can be accounted for only by thebureaucratic difficulties encountered by the Iraqi administration, not by Iraq'salleged insolvency.

40.

    The applicant rejects the Council‘s argument that the impossibility of recoveringits debts was attributable not to Regulation No 2340/90 but to a more remotecause, namely the invasion of Kuwait by Iraq, in violation of international law. Thefact that the Community embargo on trade with Iraq was justified by that State'sprevious unlawful conduct does not mean that the Community is under noobligation to compensate third parties for an impairment of their property rightsequivalent to expropriation. Nor is the existence of the direct link claimed in thiscase undermined by that fact that the damage suffered is attributable to anunlawful cause, namely Law No 57, which was adopted as a counter-measure to aprevious lawful measure, namely the adoption of Regulation No 2340/90 (Case145/83 Adams v Commission [1985] ECR 3539).

41.

    As to the Council‘s argument that, ultimately, it was the resolutions adopted by theUnited Nations Security Council that gave rise to the damage, the applicant repliesthat United Nations Security Council resolutions have no direct effect in the legalsystems of the Member States.

42.

    With regard to the question raised by the defendants as to whether, first, theapplicant's claims actually constitute an 'asset‘ within the meaning of Law No 57and, second, whether that Law is still in force, the applicant maintains that all thatmatters is the fact that the Iraqi authorities continue to refuse to honour theirdebts.

43.

    Finally, the applicant maintains that, contrary to the Council's contention, the factthat Regulation No 2340/90 was concerned solely with imports and exports of goodsand not the provision of services has no bearing on any appraisal as to whether ornot there was a causal link since it was because of the adoption of that regulationthat the Iraqi authorities refused to settle their debts.

44.

    The Council contends that even if the applicant's claims against Iraq were to beregarded as having become irrecoverable and if, therefore, it had suffered damage,there was no link, or at least no 'sufficiently direct‘ link, between that damage andthe adoption of Regulation No 2340/90.

45.

    According to the Council, Iraq's refusal to settle the applicant's claims is due notto the application of Law No 57, adopted as a counter-measure to Regulation No2340/90, but to the financial difficulties experienced by Iraq as a result of its policyof aggression towards neighbouring States. Moreover, since, at the time when LawNo 57 was adopted, the Iraqi authorities had not yet transferred the funds into abank account in the name of the applicant, no 'property‘ or 'asset‘ belonging tothe applicant had been frozen within the strict sense of the provisions of that Law.

46.

    Even if it were assumed that the damage invoked by the applicant was to beregarded as caused by the application of Law No 57, the Council considers that,contrary to the applicant's assertion, it was not Regulation No 2340/90 thatprompted the adoption of that Law but United Nations Security CouncilResolutions Nos 660 (1990) and 661 (1990), which ordered an embargo to beimposed on trade with Iraq which the Community was legally bound to apply. Itfollows that the adoption of Law No 57 cannot be regarded as a 'sufficientlydirect‘ consequence of the adoption of Regulation No 2340/90 within the meaningof the relevant case-law.

47.

    Moreover, the alleged causal link is non-existent since, placed in its historicalcontext, Law No 57 cannot be regarded as a 'reaction‘ by Iraq to the embargoordered by the United Nations Security Council and put into effect by theCommunity by means of Regulation No 2340/90, because the measures against Iraqwere adopted following earlier breaches of international law by that country.

48.

    Finally, the Council maintains that, since the aim of Regulation No 2340/90 was toprevent imports and exports of goods and not to prohibit Community economicoperators from receiving payment of debts already owed to them by the Iraqiauthorities, there is no sufficiently direct causal link between the adoption of thatregulation and the alleged damage.

49.

    The Commission contends that the damage alleged by the applicant derives solelyfrom Law No 57 and not from the adoption of Regulation No 2340/90: the latterwas merely used by Iraq as a pretext for suspending payment of its debts as a resultof the difficulties it was experiencing and the adverse financial situation in whichit found itself as a result of its engaging in warfare in the region and its armamentspolicy.

50.

    Furthermore, it is clear from Articles 5 and 7 of Law No 57 that Iraq has notdefinitively refused to pay its debts to the applicant, which explains why theapplicant suggested assigning its claims to the defendants in return forcompensation: for that reason too, therefore, there is no direct link between thedamage alleged and Regulation No 2340/90. In any event, even if the existence ofan indirect causal link were sufficient to give rise to non-contractual liability on thepart of the Community, the fact remains that such a link is irrelevant incircumstances such as those of this case where it relates to lawful conduct (the

adoption by the Council of Regulation No 2340/90) which subsequently gave riseto unlawful conduct by a third party (the adoption by Iraq of Law No 57).

51.

    The Commission adds that, by letter to the President of the United NationsSecurity Council of 28 February 1991, Iraq formally acknowledged the legality ofUnited Nations Security Council Resolution No 660 (1990) and of the otherresolutions which followed in the wake of Law No 57, and that that Law was finallyrepealed on 3 March 1991, with the result that, as from that date, the applicant wasin a position to call on the Iraqi authorities to settle its claims.

52.

    As to the request that witness evidence be taken from the former Presidents of theCommission and the Council, the Commission states that it would be pointless todo so since the evidence required of the applicant cannot consist of statements bythose persons.

The damage

53.

    The applicant claims that it suffered a 'still subsisting injury‘ within the meaningof the Community case-law on non-contractual liability because its debts againstIraq became irrecoverable following the adoption of Regulation No 2340/90. Thefact that it suggested assigning its claims to the defendants in return for thecompensation sought in no way detracts from the existence of the damage but isintended merely to prevent any unjust enrichment on its part. If the defendantsseek to challenge both the existence of its claims against Iraq and the impossibilityof securing payment of them, the applicant suggests that evidence be taken fromits commercial manager, Hartwig von Bredow, and its representative in Baghdad,Wolfgang Johner. If it did not explain why the Iraqi authorities failed to settle itsclaims, that was because it had not received any explanation itself, particularly sincethe Community embargo on the provision of services to Iraq (Council Regulation(EEC) No 3155/90 of 29 October 1990 extending and amending Regulation No2340/90, OJ 1990 L 304, p. 1, hereinafter 'Regulation No 3155/90‘) prohibited itfrom giving any instructions to legal representatives in Iraq.

54.

    The applicant estimates its loss as DM 2 279 859.69, corresponding to the debtswhich the Iraqi Ministry acknowledged in its letters of 5 and 6 February 1990 andordered to be paid, although no payment has yet been received.

55.

    It maintains that, according to the case-law of the European Court of HumanRights, the amount of its compensation should reflect a just balance between thegeneral interest of the Community and the need to safeguard the fundamentalrights of the individual. That does not, in its view, mean, however, that thecompensation cannot cover the full amount of the debts which have been renderedirrecoverable by the adoption of a State measure, including all interest thereonsince they arose (Greek Refineries Stan and Stratis Andreadis, cited above). Germanlaw allows compensation to be obtained for all financial losses caused by an

'impairment of rights equivalent to expropriation‘. The same applies in the case-law of the European Court of Human Rights. The Community should thereforebe ordered to pay it, against assignment of its claims against Iraq, compensationcorresponding to the amount of those claims, together with accrued interest. However, the applicant does not exclude the possibility that the compensationclaimed might be reduced to reflect the circumstances of this case.

56.

    The Council maintains that the measures adopted by Iraq, in particular Law No 57,merely had the effect of delaying payment of the applicant's claims, so that, fromthe legal standpoint, the applicant has not suffered 'a still subsisting injury‘ withinthe meaning of the relevant case-law, a position further confirmed by the fact thatthe applicant is prepared to assign its claims to the Community institutions inreturn for compensation for the damage allegedly suffered.

57.

    Moreover, it is clear from the letter sent to it by the applicant on 4 August 1994that the applicant registered its claims with the competent administrative authoritiesin Germany, so as to be able to assert them before the Claims Commission set upby the United Nations Organisation (hereinafter 'the UNO‘) with a view to settlingthe question of financial losses suffered by operators as a result of the impositionof an embargo on trade with Iraq, which shows that the question whether theapplicant has in fact suffered damage will ultimately depend on whether the UNOlifts the embargo on trade with Iraq.

58.

    The Commission maintains that the precise amount of the damage suffered has notyet been established since, from the legal point of view, the applicant's claims havenot ceased to exist, and it rejects the applicant's proposal to assign its claims inreturn for the award of compensation by the Community.

Findings of the Court

59.

    At the outset, the Court would point out that if the Community is to incur non-contractual liability as the result of a lawful or unlawful act, it is necessary in anyevent to prove that the alleged damage is real and the existence of a causal linkbetween that act and the alleged damage (Case 26/81 Oleifici Mediterranei v EEC[1982] ECR 3057, paragraph 16, Joined Cases T-481/93 and T-484/93 Exporteurs inLevende Varkens and Others v Commission [1995] ECR II-2941, paragraph 80, CaseT-175/94 International Procurement Services v Commission [1996] ECR II-729,paragraph 44, Case T-336/94 Efisol v Commission [1996] ECR II-1343, paragraph30, Case T-267/94 Oleifici Italiani v Commission [1997] ECR II-1239, paragraph 20,and Case T-113/96 Dubois et Fils v Council and Commission [1998] ECR II-0000,paragraph 54). Secondly, with respect to the Community's liability in respect of alawful act, as in this case, the Court notes that it is clear from the relevant case-lawthat, in the event of such a principle being recognised as forming part ofCommunity law, a precondition for such liability would in any event be the

existence of 'unusual‘ and 'special‘ damage (Joined Cases 9/71 and 11/71Compagnie d'Approvisionnement and Grands Moulins de Paris v Commission [1972]ECR 391, paragraphs 45 and 46, Case 59/83 Biovilac v EEC [1984] ECR 4057,paragraph 28, Développement SA and Clemessy v Commission, cited above,paragraph 33, and De Boer Buizen v Council and Commission, cited above,paragraphs 16 and 17). It is therefore necessary to consider whether the allegeddamage exists, in the sense that it is 'actual and certain‘, whether that damage isa direct result of the Council's adoption of Regulation No 2340/90, and whether thedamage alleged is such as to render the Community liable in respect of a lawful actwithin the meaning of the abovementioned case-law.

The existence of the alleged damage

60.

    As to the question whether the applicant has in fact suffered 'actual and certain‘damage, within the meaning of the relevant case-law (Joined Cases 256/80, 257/80,265/80, 267/80 and 5/81 Birra Wührer and Others v Council [1982] ECR 85,paragraph 9, Case 51/81 De Franceschi v Council and Commission [1982] ECR 117,paragraph 9, Case T-108/94 Candiotte v Council [1996] ECR II-87, paragraph 54,Case T-99/95 Stott v Commission [1996] ECR II-2227, paragraph 72, and OleificiItaliani v Commission, cited above, paragraph 74), that is to say whether its claimsagainst Iraq have become definitively irrecoverable, the Court would point out, firstof all, that, according to established case-law, it is incumbent upon the applicant toproduce to the Community judicature the evidence to establish the fact of the losswhich he claims to have suffered (Case T-575/93 Koelman v Commission [1996]ECR II-1, paragraph 97).

61.

    It must be stated that in this case, whilst it is common ground that the applicant'sclaims have not yet been paid, the fact remains that the evidence produced by theapplicant is not such as to show, to the requisite legal standard, that it has beenconfronted with a definitive refusal by the Iraqi authorities to settle their debts,prompted by the adoption of Regulation No 2340/90. The applicant has producedno evidence to show that it has actually contacted, or at least attempted to contact,either the appropriate Iraqi State authorities or Rafidian Bank in order to clarifywhy the orders for payment of its claims given to Rafidian Bank by letters of 5 and6 February 1990 from the Iraqi Ministry have not yet been executed.

62.

    In that connection, the Court, by way of measure of organisation of procedure,asked the applicant to produce any correspondence between it and the Iraqiauthorities concerning the payment of its claims. In its written answers to thequestions put to it by the Court, the applicant admitted that it had not exchangedany correspondence with the Iraqi authorities, emphasising that it was not in itsinterest to 'cast any doubt, by further correspondence, on the binding nature of theorders given on 5 and 6 February by the Ministry of Housing and Reconstructionto Rafidian Bank‘ and that it 'would, moreover, have been unacceptable, andtherefore counter-productive, to seek to expedite, by setting out its views in writing,

the internal execution of orders from the Ministry‘. However, the fact that theapplicant did not consider it useful or appropriate to seek to 'expedite the internalexecution of orders from the Iraqi Ministry‘ is not sufficient in itself to support itsassertion that the Iraqi authorities have definitively refused to pay its claims. Consequently, the possibility cannot be ruled out that the non-payment of its claimsmay be due to a mere delay of an administrative nature, a temporary refusal to payor temporary or permanent insolvency on the part of Iraq.

63.

    That conclusion is not put in doubt by the letter of 10 October 1990 sent by theIraqi Minister to the applicant and produced by the latter at the hearing on 19June 1997, from which it appears, according to the applicant, that the IraqiMinister gave it to be understood 'in diplomatic language‘ that its claims would notbe paid for so long as the Community embargo on trade with Iraq remained inforce. That letter, sent to the applicant 'when the unification of the FederalRepublic of Germany and the German Democratic Republic was declared‘, makesno reference to the contractual relations between the applicant and the Iraqiauthorities under the 1975 contract nor, a fortiori, to the fate of the applicant'sclaims, but confines itself to statements of a general nature concerning thecontribution which German undertakings might be able to make to 'thedevelopment of productive bilateral cooperation‘ between Germany and Iraq, andthe damage caused to such relations by the embargo and the 'threats hanging overIraq‘.

64.

    Moreover, whilst the applicant refers, in its written answer to the abovementionedquestion from the Court, to certain confidential reports which the assistant managerof its branch in Iraq had drawn up, showing that the Iraqi authorities are stillrefusing to pay its claims because of the maintenance of the Community embargo,it must be pointed out that it did not produce copies of those reports to the Court.

65.

    In any event, even if it is assumed, as claimed by the applicant in its application,that Iraq's refusal to pay its debts derives from the adoption of Law No 57, whichfroze all assets of undertakings established in States whose governments hadadopted 'arbitrary decisions‘ against it, such as Regulation No 2340/90, that Law,as the defendants have made clear in their pleadings, was finally repealed on 3March 1991. It follows that, at least from that date, there should in principle havebeen no legal obstacles preventing the Iraqi authorities from paying the applicant'sclaims. The Court, by way of measures of organisation of procedure, asked theapplicant to state whether it had taken the necessary steps following the repeal ofLaw No 57 to secure payment of its claims and the reasons for which theyremained unpaid notwithstanding that repeal. In its written answer, the applicantstated, as moreover it had done for the first time in its reply, that Law No 57cannot be regarded as the cause of Iraq's refusal to pay but must be seen asevidence of that refusal in that, as debtor, Iraq needed no legal basis for failing todischarge its contractual obligations. However, even if it were assumed that it wasnot, ultimately, because of the adoption of Law No 57 that Iraq refused to settle

the applicant's claims — which in any event runs counter to the line of argumentdeveloped in its application — the fact remains that its assertion is unsupportedsince, as just pointed out, the applicant has still not established that the refusal topay was final and it has not set out the reasons for the persistence of that refusaldespite the repeal of Law No 57.

66.

    Moreover, as is clear from the documents before the Court, the applicant did noteven attempt to avail itself of the contractual remedies included for that purposein the contract which it had signed with the Iraqi Ministry on 30 January 1975 inorder to obtain from the Iraqi authorities a definitive statement of their positionconcerning the non-payment of its claims. According to Article X of that contract(see paragraph 2 above), in the event of differences arising as to the interpretationof the contract or non-performance of contractual obligations, the contractingparties were to endeavour to find an acceptable solution by conciliation, failingwhich they were to refer the matter to the Planning Board, and even then theywould not forfeit their right to bring the same dispute before the competent Iraqicourts (Article X(1) and (2) of the contract). As the applicant explained at thehearing on 19 June 1997, the Community embargo on the provision of services inIraq and Kuwait introduced by Regulation No 3155/90 prevented it from instructingIraqi lawyers or legal representatives. However, whilst the possibility cannot beexcluded that, in view of the domestic situation in Iraq after the end of the GulfWar, recourse by foreign undertakings to Iraqi lawyers to resolve disputes betweenthem and the Iraqi authorities might be difficult, the fact remains that, contrary tothe applicant's assertion, that difficulty did not derive from Regulation No 3155/90since the latter merely prohibited the provision of services, in or from theCommunity, to natural persons in Iraq or to undertakings registered in Iraq withthe object or effect of promoting the economy of Iraq, but not the provision ofservices in Iraq to third parties by natural or legal persons established in thatcountry (Article 1 of the regulation).

67.

    Finally, the fact that the applicant has offered to assign its claims against Iraq tothe defendants in return for payment of the amount at issue rules out theconclusion, in the absence of any evidence to the contrary, that those claims are tobe regarded as having become definitively irrecoverable.

68.

    It is clear from the foregoing that the applicant has been unable to demonstrate tothe requisite legal standard that it has suffered actual and certain damage withinthe meaning of the case-law cited above (see paragraph 60).

69.

    However, even if it were assumed that the damage alleged by the applicant couldbe regarded as 'actual and certain‘, the Community's liability for a lawful act couldbe incurred only if there was a direct causal link between Regulation No 2340/90and that damage. In view of the particular features of this case, the Courtconsiders it appropriate to examine that possibility and to ascertain whether in thiscase such a causal link exists.

The causal link

70.

    The applicant's argument is that, in so far as its claims have become irrecoverablethrough Iraq's adoption of Law No 57 as a foreseeable and direct counter-measureto the adoption of Regulation No 2340/90 imposing a trade embargo on Iraq, thedamage which it allegedly suffered must ultimately be attributed to the Community. It is therefore necessary to consider first of all whether the applicant's claimsagainst Iraq have become irrecoverable as a result of the adoption of Law No 57and, if so, whether the adoption of that Law and the Iraqi authorities' subsequentrefusal to pay those claims derive directly from the adoption of Regulation No2340/90 (see International Procurement Services v Commission, cited above,paragraph 55).

71.

    In that regard, the Court notes, first, that it is clear from the preamble to Law No57 that its enactment was justified by the adoption by 'certain governments‘ of'arbitrary decisions‘ against Iraq. However, it must be observed that Law No 57contains no reference to the European Community or to Regulation No 2340/90. Even if it were assumed that Law No 57 referred by implication to the governmentsof all the Member States, it is undeniable that it was not those governments but theCommunity which adopted Regulation No 2340/90 prohibiting trade between theCommunity and Iraq.

72.

    Even if it were appropriate to see the adoption by the Council of Regulation No2340/90 as an 'arbitrary decision‘ taken by 'certain governments‘ within themeaning of Law No 57, the Court considers that the applicant, which bears theburden of proof (Case 40/75 Produits Bertrand v Commission [1976] ECR 1 andCase T-485/93 Dreyfus v Commission [1996] ECR II-1101, paragraph 69), has notestablished to the requisite legal standard that the adoption of that Law constituted,as a retaliatory measure, an objectively foreseeable consequence, in the normalcourse of events, of the adoption of that regulation. Moreover, even if such adirect causal link existed between the damage allegedly suffered and the adoptionof Law No 57, it is clear from the documents before the Court that that Law, whichentered into force on 6 August 1990, was finally repealed on 3 March 1991. Itfollows that, since that date at least, Law No 57 cannot be regarded as the causeof the refusal to pay the applicant's claims.

73.

    In any event, even if it were appropriate to consider that Law No 57 was aforeseeable consequence of the adoption of Regulation No 2340/90 and/or that,despite the repeal of that Law, it was still by way of retaliation for the maintenanceof the Community embargo that the Iraqi authorities were refusing to pay theapplicant's claims, the Court considers that the alleged damage cannot, in the finalanalysis, be attributed to Regulation No 2340/90 but must, as the Council has infact contended, be attributed to United Nations Security Council Resolution No 661(1990) which imposed the embargo on trade with Iraq.

74.

    In that regard, the Court observes that, under Article 25 of the United NationsCharter, only the 'Members of the United Nations‘ are required to accept andcarry out the decisions of the Security Council of that organisation. Whilst it is truethat the Member States of the UNO were required, in that capacity, to take allnecessary measures to give effect to the trade embargo against Iraq imposed byResolution No 661 (1990), the fact remains that those of them which were alsoMember States of the Community were able to take action to that effect onlyunder the Treaty, since any measure of common commercial policy, such as theimposition of a trade embargo, falls, by virtue of Article 113 of the Treaty, withinthe exclusive competence of the Community. It was on the basis of thoseconsiderations that Regulation No 2340/90 was adopted, its preamble stating that'the Community and its Member States have agreed to have recourse to aCommunity instrument in order to ensure uniform implementation, throughout theCommunity, of the measures concerning trade with Iraq and Kuwait decided uponby the United Nations Security Council‘. The Court therefore considers that, inthe circumstances of this case, the alleged damage can be attributed not to theadoption of Regulation No 2340/90 but only to United Nations Security CouncilResolution No 661 (1990) which imposed the embargo on trade with Iraq. Itfollows from the foregoing that the applicant has not demonstrated the existenceof a direct causal link between the alleged damage and the adoption of RegulationNo 2340/90.

75.

    In view of the particular circumstances of this case, the Court considers that it isalso appropriate to examine whether, in the event that the conditions relating tothe existence of damage and of a direct causal link have been fulfilled, the damagecould be classified as 'special‘ and 'unusual‘ within the meaning of the case-lawreferred to above (paragraph 59) concerning the Community's liability in respectof a lawful act.

The nature of the damage suffered

76.

    The Court observes that the Court of Justice, in its judgment in Compagnied'Approvisionnement and Grands Moulins de Paris, cited above, rejected a claim forcompensation for 'unusual and special‘ damage based by the applicants onCommunity liability in respect of a lawful act owing to the 'unequal discharge ofpublic burdens‘, on the ground that 'any liability for a valid legislative measure isinconceivable in a situation like that in the present case since the measures adoptedby the Commission were only intended to alleviate, in the general economicinterest, the consequences which resulted in particular for all French importersfrom the national decision to devalue the franc‘ (paragraphs 45 and 46 of thejudgment).

77.

    Similarly, in Biovilac v EEC, cited above, the Court of Justice held that thecondition whereby the Community can incur liability in respect of an unlawfullegislative act only where the damage alleged exceeds the limits of the economic

risks inherent in operating in the sector concerned 'would have to be applied afortiori if the concept of liability without fault were accepted in Community law‘(paragraph 28 of the judgment). In that case, the applicant based its claim forcompensation for an unlawful act on the German legal concept of 'exceptionalsacrifice‘ (Sonderopfer) and the French legal concept of 'unequal discharge ofpublic burdens‘, both of which are also relied on by the applicant in theseproceedings.

78.

    In its judgment in Développement SA and Clemessy v Commission, cited above, theCourt of Justice also rejected a claim for compensation based on strict liability,declaring that that principle, as described by the applicants, implied that 'anindividual has to bear, in the public interest, a financial burden which would notnormally fall upon him‘, which was not, however, the case (paragraph 33 of thejudgment).

79.

    Finally, in its judgment in De Boer Buizen v Council and Commission, cited above,the Court of Justice, having held that the scheme established by the Communityinstitutions to implement an arrangement between the Community and the UnitedStates of America for trade in steel pipes and tubes did not give rise to anydiscrimination against Community producers of those products as compared withdistributors and that, therefore, the conditions for Community liability for anunlawful act to be incurred were not met, added, however, that the absence of anysuch discrimination between Community producers and distributors of the productsat issue did not mean that the institutions would not bear 'a degree ofresponsibility‘ if it were found that certain undertakings, 'as a category, had tobear a disproportionate part of the burden‘ attributable to the implementation ofthat trade arrangement. According to the Court of Justice, in such circumstances'it would be for the Community institutions to provide a remedy‘ (paragraphs 16and 17 of the judgment).

80.

    It is clear from the abovementioned case-law of the Court of Justice that, in theevent of the principle of Community liability for a lawful act being recognised inCommunity law, such liability can be incurred only if the damage alleged, if deemedto constitute a 'still subsisting injury‘, affects a particular circle of economicoperators in a disproportionate manner by comparison with others (unusualdamage) and exceeds the limits of the economic risks inherent in operating in thesector concerned (special damage), without the legislative measure that gave riseto the alleged damage being justified by a general economic interest (De BoerBuizen v Council and Commission, Compagnie d'Approvisionnement and GrandsMoulins de Paris, and Biovilac v EEC, all cited above).

81.

    As regards the unusual nature of the alleged damage, in that it affects a particularcategory of economic operators in a disproportionate manner by comparison withothers, the Court notes, first, that the adoption of Law No 57, to which, accordingto the applicant's reasoning, must be assimilated any other retaliatory measure by

the Iraqi authorities having the same effects, was designed to freeze the 'assets‘held in Iraq by undertakings established in the Community, together with the'income‘ produced by those 'assets‘. It follows that it was not only the applicant'sclaims that were affected but also those of all other Community undertakingswhich, when the embargo on trade with Iraq was imposed by Regulation No2340/90, had not yet been paid. As the applicant stated at the hearing, the claimsof Community undertakings against Iraq which, following the imposition of theCommunity embargo on trade with that country, became irrecoverable and had tobe covered by State guarantees amounted to US $18 000 million.

82.

    In those circumstances, the applicant cannot be regarded as forming part of acategory of economic operators whose property interests were affected in a mannerwhich set them apart from all other economic operators whose claims becameirrecoverable as a result of imposition of the Community embargo. It cannottherefore claim to have suffered special damage or to have made an exceptionalsacrifice. Moreover, the fact that it was not possible to obtain cover for its claimsby State guarantees because they derived from the performance of a contractconcluded before the implementation in Germany of a system of guarantees againstcommercial risks in countries like Iraq, as it explained in its written answers toquestions from the Court and at the hearing, is not such as to distinguish it fromthe undertakings which did benefit from such guarantees. The applicant has beenunable to establish that it was the only undertaking or that it belonged to a smallgroup of economic operators for which the benefit of insurance cover of that kindwas unavailable.

83.

    Secondly, as far as the special nature of the alleged damage is concerned, in thatit exceeds the economic risks inherent in doing business in the sector concerned,the Court considers that in this case those limits have not been exceeded. It iscommon ground that Iraq, by reason of its involvement in a war with Iran longbefore its invasion of Kuwait on 2 August 1990, was already regarded, as thedefendants have contended without being contradicted by the applicant, as a 'high-risk country‘. In those circumstances, the economic and commercial risks derivingfrom the possible involvement of Iraq in renewed warfare with neighbouringcountries and the suspension of payment of its debts for reasons associated with itsforeign policy constituted foreseeable risks inherent in any provision of services inIraq. The fact that Iraq succeeded, as the applicant asserts, in paying its debts,albeit after a considerable delay, could not mean that the abovementioned risks haddisappeared.

84.

    That conclusion is corroborated, moreover, by a letter of 28 November 1995 sentby the Federal Ministry of Finance to the Commission, from which it appears thatthe system of guarantees established in Germany between 1980 and 1990 to coverdebts in respect of German exports to Iraq was suspended on several occasionsspecifically because of the deteriorating political situation in Iraq.

85.

    It follows that the risks involved in the applicant's providing services in Iraq formedpart of the risks inherent in operating in the sector concerned.

86.

    Finally, and in any event, it must be observed, first, that Regulation No 2340/90,even assuming, as the applicant asserts, that it is at the root of the alleged damage,constitutes, as just indicated (see paragraph 74 above), implementation in theCommunity of the obligation incumbent on the Member States as members of theUNO to give effect, by means of a Community measure, to United Nations SecurityCouncil Resolution No 661 (1990), which imposed a trade embargo against Iraq. Secondly, as is apparent in particular from Resolution No 661 (1990), the tradeembargo against Iraq was decided upon in order to ensure the 'maintenance ofinternational peace and security‘ and on the basis of the 'inherent right ofindividual or collective self-defence, in response to the armed attack by Iraq againstKuwait, in accordance with Article 51 of the Charter [of the United Nations].‘

87.

    As the Court of Justice held in Case C-84/95 Bosphorus v Minister for Transport,Energy and Communications, Ireland and the Attorney General [1996] ECR I-3953,whilst it is true that rules intended, by the imposition of a trade embargo againsta non-member country, to maintain international peace and security have, bydefinition, effects which affect the freedom to pursue a trade or business, therebycausing harm to persons who are in no way responsible for the situation which ledto the adoption of the sanctions, the fact nevertheless remains that the importanceof the aims pursued by such rules is such as to justify negative consequences, evenof a substantial nature, for some operators.

88.

    Consequently, having regard to the objective of general interest so fundamental forthe international community of bringing to an end the invasion and occupation ofKuwait by Iraq and maintaining international peace and security in the region, thedamage alleged by the applicant, even if it were capable of being classified assubstantial, within the meaning of the Bosphorus judgment, cited above, cannotrender the Community liable in this case (see also Compagnie d'Approvisionnementand Grands Moulins de Paris, cited above, paragraph 46, and the Opinion ofAdvocate General Mayras in that case, at pp. 417, 425 and 426).

89.

    It follows from all the foregoing that the applicant's claim for compensation, basedon the principle of Community liability in respect of a lawful act, is unfounded andmust therefore be rejected.

The alternative claim for compensation for damage allegedly suffered as a resultof an unlawful act

Arguments of the parties

The illegality of Regulation No 2340/90

90.

    The applicant seeks, in the alternative, to establish the Community's liability inrespect of an unlawful act in the event of the Court of First Instance consideringthat it is entitled not to compensation corresponding to the current value of itsclaims but rather to determination by the Community legislature of compensationat a fixed rate for the damage suffered. It maintains in that regard that since, whenadopting Regulation No 2340/90, the Community legislature did not provide formachinery to compensate economic operators whose claims against Iraq were tobecome irrecoverable as a result of the imposition of an embargo on trade withthat country, the condition to be met for the Community to incur liability, namelythe existence of an unlawful act, is fulfilled in this case, such illegality consistingprecisely in breach of the obligation to pay, or provide for, compensation forpersons whose property rights have, without fault, been adversely affected, whichconstitutes a general principle of law. According to the applicant, the Council andthe Commission in this case failed in their obligation to exercise the discretionavailable to them in order to provide for compensation of 100%, 50% or someother percentage, thereby committing an error of appraisal of the kind found by theCourt of First Instance in its judgment in Carvel and Guardian Newspapers, citedabove.

91.

    The Council considers that the alleged unlawful omission on the part of theCommunity legislature in failing, when adopting Regulation No 2340/90, to providefor machinery to compensate economic operators affected by the embargo againstIraq raises, essentially, the same substantive issue as the applicant's claim forcompensation in respect of a lawful impairment of its property rights equivalent toexpropriation. In both cases the issue is whether the infringement of the right toproperty relied upon by the applicant constitutes a breach of a superior rule of lawcausing the Community to incur liability under the second paragraph of Article 215of the Treaty. In the Council's view, that question should be answered in thenegative.

92.

    According to the Council, since Regulation No 2340/90 is a legislative measure ofan economic nature, the Community can incur liability only if there is a sufficientlyserious breach of a superior rule of law for the protection of individuals, and therehas been no such breach in this case. It states that, according to the case-law,exercise of the right to property may be subjected to restrictions provided that theycorrespond to Community objectives and do not constitute a disproportionate andintolerable interference which infringes upon the very substance of the rightsguaranteed (Case 265/87 Schräder v Hauptzollamt Gronau [1989] ECR 2237). However, even if the applicant's claims against the Iraqi authorities had becomedefinitively irrecoverable, the damage suffered by it would not constitute adisproportionate and serious impairment of the substance of its right to property.

93.

    Moreover, according to the Council, in the case of damage of an economic nature,the Community can incur non-contractual liability only if, first, the institutionconcerned has, without invoking a higher public economic interest, failed to takeany account of the specific situation of a clearly defined group of economic

operators (Joined Cases C-104/89 and C-37/90 Mulder and Others v Council andCommission [1992] ECR I-3061), and, second, the alleged damage exceeds thelimits of the economic risks inherent in operating in the economic sector concerned. In this case, however, the applicant's commercial interests were impaired in thesame way as those of any other economic operator with claims against Iraq or acompany established there. Moreover, it is common ground that the financialsituation of Iraq at the time was such that the non-recovery of debts deriving fromtransactions with that country formed part of the risks inherent in the businessactivities concerned. Finally, in the sphere of Community economic policy,individuals are required, within reasonable limits, to accept the harmfulconsequences which a legislative measure may have on their economic interests,without any right to compensation (Joined Cases 83/76, 94/76, 4/77, 15/77 and 40/77Bayerische HNL and Others v Council and Commission [1978] ECR 1209,paragraph 6, and Joined Cases T-480/93 and T-483/93 Antillean Rice Mills andOthers v Commission [1995] ECR II-2305).

94.

    The Commission submits that the merits of the applicant's arguments based on thealleged unlawfulness of Regulation No 2340/90 depend on the existence of the rightto compensation which it asserts in its main claim, so that the non-existence of anysuch right necessarily means that its alternative claim for damages must be rejected.

The causal link and the damage suffered

95.

    The applicant, the Council and the Commission put forward the same pleas andarguments concerning the alleged damage and the existence of a causal linkbetween such damage and Regulation No 2340/90 as those put forward in the mainclaim for compensation in respect of a lawful act (see paragraphs 42 to 57 and 58to 63 above).

Findings of the Court

96.

    The Court notes, as a preliminary point, that, as the applicant emphasised in itsreply and at the hearing on 19 June 1997, its alternative claim for compensation ismade only in the event of the Court recognising in favour of economic operatorslike the applicant, whose claims have become irrecoverable as a result of theimposition of a trade embargo against Iraq, only a right to compensation at a fixedrate and not a right to compensation corresponding to the current value of theirclaims (see paragraph 90 above), as sought in its principal claim for compensationin respect of a lawful act.

97.

    For the purposes of its alternative claim, the applicant maintains, in particular, thatthe conditions for the Community to incur liability on account of the unlawfulnature of Regulation No 2340/90 are met in this case in that the Community

legislature failed, when adopting that regulation, to exercise the discretion availableto it in order to provide for compensation for the damage which economicoperators would suffer as a result of the imposition of an embargo on trade withIraq.

98.

    The Court considers that this alternative claim for compensation, formulated by theapplicant in the terms set out above, presupposes, as the defendants have moreoverpointed out, that it is entitled to compensation, as it asserts in its main claim forcompensation in respect of a lawful act.

99.

    However, the examination of the main claim has clearly disclosed that the applicantcannot be recognised as being entitled to any compensation since it has notestablished, in particular, that it suffered actual and certain damage. In thosecircumstances, whatever the relevance of the distinction drawn by the applicantbetween a possible right to compensation corresponding to the current value of itsclaims and a possible right to compensation at a fixed rate, since both claims seekcompensation for the same damage, its alternative claim must also be rejected. Inthose circumstances, in the absence of any right to compensation, the applicantlikewise cannot claim that the Community legislature failed to exercise its discretionin order to adopt measures to compensate undertakings in the same situation asthe applicant. As to the judgment in Carvel and Guardian Newspapers, cited above(paragraph 78) and referred to by the applicant, the Court considers it irrelevantsince, in that case, in contrast to this one, a provision of Community secondarylegislation in fact called on the Council to exercise its discretion as to whether ornot it should accede to requests in areas within its competence regarding access toits documents.

100.

    Accordingly, the applicant's alternative claim for compensation for damage sufferedin respect of an unlawful act must also be rejected.

101.

    It follows from all the foregoing that the application must be dismissed in itsentirety.

Costs

102.

    Under Article 87(2) of the Rules of Procedure, the unsuccessful party is to beordered to pay the costs, if they have been asked for in the successful party'spleadings. Since the defendants have applied for costs and the applicant has beenunsuccessful, the latter must be ordered to pay the costs.

On those grounds,

THE COURT OF FIRST INSTANCE (Second Chamber)

hereby:

1.    Dismisses the application;

2.    Orders the applicant to pay the costs.

BellamyKalogeropoulos Tiili

Delivered in open court in Luxembourg on 28 April 1998.

H. Jung

A. Kalogeropoulos

Registrar

President

1: Language of the case: German.

ECR