JUDGMENT OF THE COURT (First Chamber)

14 September 1999 (1)

(Failure to fulfil obligations — Regulation (EEC) No 4055/86 — Freedom toprovide services — Maritime transport)

In Case C-170/98,

Commission of the European Communities, represented by Frank Benyon, LegalAdviser, and Bernard Mongin, of its Legal Service, acting as Agents, with anaddress for service in Luxembourg at the office of Carlos Gómez de la Cruz, of itsLegal Service, Wagner Centre, Kirchberg,

applicant,

v

Kingdom of Belgium, represented by Jan Devadder, General Adviser in the LegalDirectorate of the Ministry of Foreign Affairs, Foreign Trade and Cooperation withDeveloping Countries, acting as Agent, with an address for service in Luxembourgat the Belgian Embassy, 4 Rue des Girondins,

defendant,

APPLICATION for a declaration that, by failing either to adjust the agreementwith the Republic of Zaire in such a way as to provide for fair, free and non-discriminatory access by Community nationals to the cargo shares due to Belgiumor to denounce that agreement, the Kingdom of Belgium has failed to fulfil its

obligations under Council Regulation (EEC) No 4055/86 of 22 December 1986applying the principle of freedom to provide services to maritime transport betweenMember States and between Member States and third countries (OJ 1986 L 378,p. 1), in particular Articles 3 and 4(1) thereof,

THE COURT (First Chamber),

composed of: P. Jann, President of the Chamber, D.A.O. Edward (Rapporteur)and L. Sevón, Judges,

Advocate General: A. La Pergola,

Registrar: R. Grass,

having regard to the report of the Judge-Rapporteur,

after hearing the Opinion of the Advocate General at the sitting on 20 April 1999,

gives the following

Judgment

1.

    By application lodged at the Court Registry on 8 May 1998, the Commission of theEuropean Communities brought an action under Article 169 of the EC Treaty (nowArticle 226 EC) for a declaration that, by failing either to adjust the agreementwith the Republic of Zaire (now the Democratic Republic of the Congo) in sucha way as to provide for fair, free and non-discriminatory access by Communitynationals to the cargo shares due to Belgium or to denounce that agreement, theKingdom of Belgium had failed to fulfil its obligations under Council Regulation(EEC) No 4055/86 of 22 December 1986 applying the principle of freedom toprovide services to maritime transport between Member States and betweenMember States and third countries (OJ 1986 L 378, p. 1), in particular Articles 3and 4(1) thereof.

Legal background

2.

    Regulation No 4055/86 is intended, first, to implement Council Regulation (EEC)No 954/79 of 15 May 1979 concerning the ratification by Member States of, or theiraccession to, the United Nations Convention on a Code of Conduct for LinerConferences (hereinafter 'the Code of Conduct‘) (OJ 1979 L 121, p. 1) and,second, for Member States which had not yet ratified that convention, to implementthe convention itself.

3.

    The Code of Conduct was adopted on 6 April 1974. Its object, according to its firstrecital, is to improve the system of liner conferences. The Republic of Zaire ratifiedit in 1974 and the Kingdom of Belgium in 1988.

4.

    The Code of Conduct was applied in Community law by Regulation No 954/79. Inorder to implement certain specific aspects of the Code and to make it compatiblewith Community law, the Council adopted a number of regulations, includingRegulation No 4055/86.

5.

    That regulation gives shipping lines rights relating to the provision of maritimeservices between Member States and between Member States and third countries.

6.

    Article 1(1) of Regulation No 4055/86 provides:

'Freedom to provide maritime transport services between Member States andbetween Member States and third countries shall apply in respect of nationals ofMember States who are established in a Member State other than that of theperson for whom the services are intended.‘

7.

    Article 3 of the regulation provides:

'Cargo-sharing arrangements contained in existing bilateral agreements concludedby Member States with third countries shall be phased out or adjusted inaccordance with the provisions of Article 4.‘

8.

    Article 4(1) provides:

'Existing cargo-sharing arrangements not phased out in accordance with Article 3shall be adjusted in accordance with Community legislation and in particular:

(a)    where trades governed by the United Nations Code of Conduct for LinerConferences are concerned, they shall comply with this Code and with theobligations of Member States under Regulation (EEC) No 954/79;

(b)    where trades not governed by the United Nations Code of Conduct forLiner Conferences are concerned, agreements shall be adjusted as soon aspossible and in any event before 1 January 1993 so as to provide for fair,free and non-discriminatory access by all Community nationals, as definedin Article 1, to the cargo-shares due to the Member States concerned.‘

9.

    Article 5(1) of the regulation provides:

'Cargo-sharing arrangements in any future agreements with third countries areprohibited other than in those exceptional circumstances where Community linershipping companies would not otherwise have an effective opportunity to ply for

trade to and from the third country concerned. In these circumstances sucharrangements may be permitted in accordance with the provisions of Article 6.‘

10.

    In accordance with Article 12, Regulation No 4055/86 entered into force on the dayfollowing its publication in the Official Journal of the European Communities, thatis, on 1 January 1987.

11.

    On 5 March 1981 the Kingdom of Belgium and the Republic of Zaire signed anagreement on maritime transport (hereinafter 'the Agreement‘).

12.

    Under Article 1(1) of the Agreement:

'The term ”vessels of either Contracting Party” shall mean merchant vesselsregistered in the territory of that Party and flying its flag in accordance with itslegislation.‘

13.

    Article 3(3) of the Agreement provides:

'As regards maritime freight traffic of any kind between the two Parties, whateverthe port of loading or unloading, the system to be applied by the ContractingParties to vessels operated by their respective national shipping lines shall be basedon the allocation formula 40/40/20, with respect to cargoes of freight and byvolume.‘

14.

    Article 4 of the Agreement provides:

'Without prejudice to its international commitments, each Contracting Party shallhave absolute disposal of its rights of traffic under the present Agreement.‘

15.

    Article 18 of the Agreement provides:

'1.    This Agreement shall enter into force once the Contracting Parties havenotified each other that the formalities required by their respective legislations havebeen completed.

2.    It shall remain in force for an indefinite period. However, it may bedenounced at any time in writing by diplomatic channels, on six months' notice.‘

16.

    Ratification of the Agreement was notified by the Kingdom of Belgium to theRepublic of Zaire on 13 June 1983 and by the Republic of Zaire to the Kingdomof Belgium on 13 April 1987.

The pre-litigation procedure

17.

    Since it considered that the cargo-sharing provisions in the Agreement werecontrary to the provisions of and obligations under Regulation No 4055/86, as theyreserve cargo transport between the parties to vessels flying the flag of one of theparties or operated by persons or lines with the nationality of one of the parties,the Commission sent the Kingdom of Belgium a letter of formal notice on 10 April1991.

18.

    In its reply of 7 June 1991 the Kingdom of Belgium stated that the Agreement wasan existing agreement, since it had been concluded before the date of entry intoforce of Regulation No 4055/86 and had been applied de facto from its signaturein 1981, so that it was not contrary to Article 5 of that regulation.

19.

    The Commission was not satisfied with the Belgian Government's reply and on 11October 1993 sent it a reasoned opinion, stating that the Agreement was contraryto Article 5 of Regulation No 4055/86 and that it reserved 40% of traffic to Belgianshipping lines to the exclusion of those of other Member States. The Commissionfurther claimed that, being discriminatory, that exclusion was clearly prohibited byArticle 1 of the regulation.

20.

    The Commission also stated that the Agreement was a new agreement because ithad not entered into force until after 1 January 1987.

21.

    However, after a more detailed study of the case, and in view of the fact that theformalities required by Belgian legislation for the entry into force of the Agreementhad been completed before Regulation No 4055/86 entered into force, theCommission reached the conclusion that the Agreement could be regarded as an'existing agreement‘ governed by Articles 3 and 4 of that regulation.

22.

    The Commission consequently, on 11 April 1996, sent the Kingdom of Belgium asupplementary letter of formal notice. In that letter the Commission noted thatdespite the statements made by the Belgian Government on several occasions, inparticular in its letter of 7 June 1991, it had no information to show that theadjustment of the Agreement had been accomplished. It therefore concluded thatby failing either to adjust the Agreement to give all Community nationals, asdefined in Article 1 of Regulation No 4055/86, fair, free and non-discriminatoryaccess to the cargo shares due to Belgium or to denounce the Agreement, asprovided for by Article 18(2) thereof, the Kingdom of Belgium had failed to fulfilits obligations under Articles 3 and 4 of Regulation No 4055/86.

23.

    In its reply of 30 August 1996 the Belgian Government expressed its satisfactionthat the Commission now considered that the Agreement came under Article 4 ofRegulation No 4055/86, and stated that it would take the necessary steps for itsadjustment.

24.

    Following that reply, the Commission sent the Belgian Government asupplementary reasoned opinion on 23 June 1997.

25.

    The Belgian Government, in its reply of 10 September 1997, primarily contestedthe Commission's argument in its supplementary reasoned opinion that the periodfor adjustment of existing cargo-sharing arrangements, with respect to tradesgoverned by the Code of Conduct, had expired on 30 May 1988. It submitted thatthe Commission had, after that date, favoured a pragmatic solution byrecommending an exchange of letters cancelling the existing arrangements, and hadeven suspended the infringement procedure for a time.

26.

    Since it had not been notified that the Belgium-Zaire Agreement had in fact beenadjusted, the Commission brought the present action.

The application

27.

    In the Commission's submission, it is clear from Article 1(1) of Regulation No4055/86 that the regulation applies the freedom to provide maritime transportservices between Member States and between Member States and third countriesto nationals of Member States who are established in a Member State other thanthat of the person for whom the services are intended. Articles 3 and 5 of theregulation lay down rules on the position as regards third countries; Article 3applies to existing agreements and Article 5 to future agreements.

28.

    Since the Commission finds that Article 18 of the Agreement provides that theparties' intention is not to be bound until the formalities required by theirrespective legislations are completed, and those formalities were completed by theKingdom of Belgium with the enactment of the Law of 21 April 1983 approving theAgreement, which was notified to the Republic of Zaire on 13 June 1983, beforethe entry into force of Regulation No 4055/86, the Commission contends that theAgreement is an existing agreement subject to Articles 3 and 4 of that regulation.

29.

    The only exceptions to the application of the freedom to provide services made byArticle 1(1) of Regulation No 4055/86 are, with respect to unilateral restrictions,in Article 2, 'by way of derogation from Article 1‘, and, with respect to trades notgoverned by the Code of Conduct, in Article 4(1)(b), which allows an additionalperiod for adjustment until 1 January 1993 at the latest.

30.

    No such period, on the other hand, is allowed to Member States for adjustment ofcargo-sharing arrangements where trades are governed by the Code of Conduct,in accordance with Article 4(1)(a) of Regulation No 4055/86.

31.

    In the Commission's submission, it follows that Member States which had alreadyratified the Code of Conduct at the date of entry into force of Regulation No

4055/86 were obliged to adjust or phase out without delay the existing bilateralagreements, namely the cargo-sharing arrangements.

32.

    Since the Code of Conduct was ratified by the Kingdom of Belgium in 1988, theCommission submits that the Kingdom of Belgium should have adjusted the cargo-sharing arrangements on that date.

33.

    The Commission adds that even if the trade in question were to be treated as notbeing a trade governed by the Code of Conduct, under Article 4(1)(b) ofRegulation No 4055/86 the deadline for adjustment of the bilateral agreementsconcerned was 1 January 1993. In short, whether the trades are governed byParagraph 1(a) or (b) of Regulation No 4055/86, the period for adjustment of thecargo-sharing arrangements has long since expired.

34.

    The Commission stresses that it does not require denunciation of the Agreement,but only the adjustment or phasing out of the arrangements in it, in accordancewith Article 3 of Regulation No 4055/86 concerning 'existing‘ agreements.However, if that adjustment or phasing out was not accepted by the other party tothe Agreement, the only available means of terminating the infringement would beto denounce the Agreement. In any event, the object of the present procedure isto ensure that the cargo-sharing arrangements are eliminated.

35.

    The Belgian Government contests the Commission's argument that the Agreementshould have been adjusted by the date on which the Code of Conduct was ratifiedby the Kingdom of Belgium. In its submission, it is nowhere laid down thatmaritime agreements must be adjusted to the Code of Conduct at the latest by thedate of its entry into force for the two contracting parties to the Agreement.

36.

    It contends, moreover, that the Commission's request for the Agreement to bedenounced is disproportionate, given that it contains a series of provisions whichare not contrary to Community law. The adjustment concerns only Articles 3 and4(1) of this agreement with the Democratic Republic of the Congo (formerly theRepublic of Zaire).

37.

    The Belgian Government submits that it always showed that it was willing to amendthe provisions at issue. Furthermore, on 22 July 1998 the Congolese authoritiesstated that they wished to convene the joint committee provided for in theAgreement, but political events since then made it impossible to arrangenegotiations. The Kingdom of Belgium therefore states that it undertakes to finalisethe adjustment of the Agreement once the political situation in the DemocraticRepublic of the Congo allows.

38.

    It is common ground (see in particular paragraphs 21 and 28 above) that theAgreement is not a future agreement within the meaning of Article 5 of Regulation

No 4055/86, and is therefore an agreement to which Articles 3 and 4 of thatregulation apply.

39.

    As regards determination of the date from which the Agreement should have beenadjusted, Article 4(1) of Regulation No 4055/86 distinguishes between tradesgoverned by the Code of Conduct and trades not so governed. Only with respectto the latter does the regulation allow Member States a period expiring on 1January 1993 for the adjustment prescribed. For trades governed by the Code ofConduct, no period is allowed for adjustment of an agreement.

40.

    On 30 March 1988 the Kingdom of Belgium ratified the Code of Conduct. As theAdvocate General has observed in point 10 of his Opinion, the fact that no periodwas allowed for adjustment of trades governed by the Code of Conduct means thatthe Agreement should have been adjusted immediately after the Kingdom ofBelgium ratified the Code.

41.

    The position of the Belgian Government is essentially that it does not contest theexistence of the obligation to amend the provisions at issue, but submits thatpolitical developments in the Congo made it impossible to arrange negotiations. Itundertakes to finalise the adjustment of the Agreement once the political situationin the Congo so permits.

42.

    The existence of a difficult political situation in a third State which is a contractingparty, as in the present case, cannot justify a failure to fulfil obligations. If aMember State encounters difficulties which make it impossible to adjust anagreement, it must denounce the agreement.

43.

    Accordingly, by failing either to adjust the Belgium-Zaire Agreement in such a wayas to provide for fair, free and non-discriminatory access by Community nationalsto the cargo shares due to Belgium or to denounce that agreement, the Kingdomof Belgium has failed to fulfil its obligations under Regulation No 4055/86, inparticular Articles 3 and 4(1) thereof.

Costs

44.

    Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to beordered to pay the costs if they have been applied for in the successful party'spleadings. Since the Kingdom of Belgium has been unsuccessful and theCommission has applied for costs, the Kingdom of Belgium must be ordered to paythe costs.

On those grounds,

THE COURT (First Chamber),

hereby:

1.    Declares that, by failing either to adjust the agreement with the Republicof Zaire (now the Democratic Republic of the Congo) in such a way as toprovide for fair, free and non-discriminatory access by Communitynationals to the cargo shares due to Belgium or to denounce thatagreement, the Kingdom of Belgium has failed to fulfil its obligations underCouncil Regulation (EEC) No 4055/86 of 22 December 1986 applying theprinciple of freedom to provide services to maritime transport betweenMember States and between Member States and third countries, inparticular Articles 3 and 4(1) thereof;

2.    Orders the Kingdom of Belgium to pay the costs.

JannEdward Sevón

Delivered in open court in Luxembourg on 14 September 1999.

R. Grass

P. Jann

Registrar

President of the First Chamber

1: Language of the case: French.