Opinion of the Advocate-General
1 In this action, the Portuguese Republic asks the Court, pursuant to Article 173 of the EC Treaty, to annul the practice of `exceptional flexibility' measures which it maintains the Commission is following in the administration of quantitative limits on importation into the European Community of textile products and clothing from non-member countries and, specifically, to annul the Commission's decision to permit quantitative limits on the importation of textile products and clothing from the People's Republic of China to be exceeded for the year 1995.
I - Legislative background
International agreements
- Multilateral agreements
2 The textiles sector was generally regulated for the first time under the Multilateral Arrangement of 20 December 1973 regarding International Trade in Textiles, commonly referred to as `the Multifibres Agreement'. (1) That agreement entered into force on 1 January 1974 and remained in force through a series of extension agreements until 31 December 1994. (2)
3 The Multifibres Agreement is designed to `achieve the expansion of trade, the reduction of barriers to such trade and the progressive liberalisation of world trade in textile products, while at the same time ensuring the orderly and equitable development of this trade and avoidance of disruptive effects in individual markets and on individual lines of production in both importing and exporting countries' (Article 1(2)). To that end, the agreement provides that `participating countries may, consistently with the basic objectives and principles of this arrangement, conclude bilateral agreements on mutually acceptable terms in order, on the one hand, to eliminate real risks of market disruption ... in importing countries and disruption to the textile trade of exporting countries, and on the other hand to ensure the expansion and orderly development of trade in textiles and the equitable treatment of participating countries' (Article 4(2)).
4 Following the Declaration at Punta del Este of 20 September 1986, international negotiations were opened with a view to integrating the textiles and clothing sector within the scope of the GATT, thereby implying the application to that sector of the general rules of the GATT and thus the tendency to the opening of national markets.
5 On 15 April 1994, the Final Act of the Uruguay Round was signed at Marrakesh; that act includes the Agreement establishing the World Trade Organisation and a series of multilateral commercial agreements annexed to the WTO Agreement, including the Agreement on Textiles and Clothing (`ATC'). The Community adhered to the Agreement by Council Decision 94/800/EC of 22 December 1994 concerning the conclusion on behalf of the European Community, as regards matters within its competence, of the agreements reached in the Uruguay Round multilateral negotiations (1986-1994). (3)
6 The ATC sets out provisions applicable to international trade for a transitional period of ten years, leading to the final integration of that sector into GATT (Article 1 of the ATC).
7 Under Article 2(1) of the ATC, all quantitative restrictions, such as those provided for in bilateral agreements, were to be notified within 60 days of the entry into force of the ATC to the Textiles Monitoring Body, also established by the ATC. (4) On the date of entry into force of the WTO Agreement, each Member was to integrate into the GATT products of the sector covered by the ATC accounting for not less than 16% of the total volume of the Member's 1990 imports (Article 2(6)). The remaining products were to be integrated in three stages, commencing respectively on the first day of the 37th month, the first day of the 85th month and, finally, the first day of the 121st month following the entry into force of the WTO Agreement. At the beginning of that third phase, `the textiles and clothing sector [were to] stand integrated into GATT 1994, all restrictions under this Agreement having been eliminated' (Article 2(8), especially subparagraph (c)).
8 Finally, concerning the various flexibility provisions, Article 2(16) of the ATC provides: `Flexibility provisions, i.e. swing, carryover and carry forward, applicable to all restrictions maintained pursuant to this Article, shall be the same as those provided for in MFA bilateral agreements for the 12-month period prior to the entry into force of the WTO Agreement. No quantitative limits shall be placed or maintained on the combined use of swing, carryover and carry forward.'
- The agreement between the European Economic Community and the People's Republic of China
9 On 9 December 1988, pursuant to Article 4 of the Multifibres Agreement, the Community concluded an agreement on trade in textile products (`the basic agreement') with the People's Republic of China, which was provisionally applied by the Community with effect from 1 January 1989 by a Council decision of 19 December 1988. (5)
10 Article 3(1) of the basic agreement provides for the establishment of a series of quantitative limits on the exportation of textile products from China, such limits being expressly indicated in Annex III to the agreement. (6) The importation of those products into the Community is subject to a double-checking system governed by Title III of Protocol A to the agreement. In particular, the Chinese authorities are to issue export licences, and the competent Community authorities are to issue the corresponding import authorisations within five working days of the presentation of the original export licence by the importer.
11 Article 5 of the basic agreement also provides for the possibility of `flexible' applications of the quantitative limits, by providing, inter alia, that in any year advance use may be made of up to 5% of the quantities fixed for the following year, 7% of quantities unused during the previous year may be carried over to the current year, and certain transfers between categories of products are authorised within a limit of 7%. The increase in any category resulting from the application of the flexibility mechanism may not in any event exceed 17%.
12 Where export licences are presented for a greater quantity of goods than indicated in the respective quotas and resulting from the application of flexibility measures, the Community authorities may suspend the issue of import authorisations. The Chinese authorities are to be immediately informed, thereby setting in motion, under Article 16 of the basic agreement, (7) consultation procedures within the Joint Committee established by the Trade and Economic Cooperation Agreement between the European Economic Community and the People's Republic of China of 21 May 1985. (8)
13 Finally, Article 20 of the basic agreement fixes its expiry date as 31 December 1992.
14 The agreement has been extended and amended several times, both as regards export quantities of the various categories of products and the flexibility percentages.
15 In particular, the agreement of 8 December 1992 fixed the quantitative import limits into the Community for 1993, 1994 and 1995 and amended the flexibility percentages laid down in Article 5 of the basic agreement. Under the terms of that amendment, it is possible to use each year between 5% and 2% of the quantities fixed for the following year and the carry forward to the current year of quantities unused in the previous year may be between 7% and 5%. However, in both cases, the maximum percentage cannot be applied until after consulting the Textile Committee, in accordance with the procedure laid down in Article 16(2) of the basic agreement.
16 The agreement of 14 December 1994 merely amended the quantities of imports into the Community of Chinese textiles following the accession of the Republic of Austria, the Republic of Finland and the Kingdom of Sweden to the European Union.
17 On the same day, an agreement was signed amending the increase and flexibility coefficients in the basic agreement in anticipation of China's accession to the World Trade Organisation (point 2(a) of the agreement). The actual application of those coefficients is, however, suspended until such accession.
18 Finally, the agreement of 13 December 1995 extended the basic agreement from 1 January 1996 until 31 December 1998, and amended the flexibility coefficients in Article 5 of the basic agreement. Under the terms of that amendment, it is possible to use each year between 2% and 1% of the quantities fixed for the following year and the carry forward to the current year of quantities unused in the previous year may be between 5% and 3%. However, in both cases, a maximum percentage of, respectively, 5% and 7% may be applied, but only after consulting the Textile Committee, in accordance with the procedure laid down in Article 16(2) of the basic agreement. That agreement also reduces the possibility of applying flexibility measures between the various categories.
- Community Regulation No 3030/93
19 Council Regulation (EEC) No 3030/93 of 12 October 1993 on common rules for imports of certain textile products from third countries (9) (`Regulation No 3030/93') fixes the quantitative limits for Community imports of textiles from non-member countries and governs the procedure for monitoring those imports.
20 Under Article 1(1), as amended by Regulation No 3289/94 of 22 December 1994, (10) the regulation applies to `- imports of textile products listed in Annex I, originating in third countries with which the Community has concluded bilateral agreements, protocols or other arrangements as listed in Annex II, (11) - imports of textile products which have not been integrated into the World Trade Organisation within the meaning of Article 2.6 of the World Trade Organisation Agreement on Textiles and Clothing (ATC) as listed in Annex X and which originate in third countries, Members of the WTO as listed in Annex XI.'
21 The Community quantitative limits for each category of products and each exporting non-member country are set out in Annex V to Regulation No 3030/93. Under Article 2 of the regulation, `the release for free circulation in the Community of imports subject to the quantitative limits referred to in Annex V shall be subject to the presentation of an import authorisation issued by the Member States' authorities'. To avoid exceeding the agreed limits, those authorities do not issue an import authorisation until they have received `confirmation by the Commission that there are still quantities available of the total Community quantitative limits for the categories of textile products and for the third countries concerned, for which an importer or importers have submitted applications' (Article 2(2) and (7)).
22 The procedure for issuing import authorisations is laid down by Article 12 of Regulation No 3030/93, which provides: `For the purpose of applying Article 2(2), the competent authorities of the Member States, before issuing import authorisations, shall notify the Commission of the amounts of the requests for import authorisations, supported by original export certificates, which they have received. By return the Commission shall notify its confirmation that the requested amount(s) of quantities are available for importation in the chronological order in which the notifications of the Member States have been received ("first come, first served" basis). However, in exceptional cases where there is reason to believe that anticipated requests for import authorisations may exceed the quantitative limits, the Commission, in accordance with the procedure laid down in Article 17, may limit the amount to be allocated on the "first come, first served" basis to 90% of the quantitative limits in question. In such cases, as soon as this level has been reached, the allocation of the remainder shall be decided in accordance with the procedure laid down in Article 17' (Article 12(1)). Article 12 also provides that, `unless for imperative technical reasons it is necessary to use other means of communication temporarily', the notifications referred to in the previous paragraphs are to be `communicated electronically within the integrated network set up for [that] purpose' (Article 12(3)), and that `as far as possible, the Commission shall confirm to the authorities the full amount indicated in the requests notified for each category of products and each third country concerned. Notifications presented by Member States for which no confirmation can be given because the amounts requested are no longer available within the Community quantitative limit, will be stored by the Commission in the chronological order in which they have been received and confirmed in the same order as soon as further amounts become available, for example through the application of flexibilities [provided for] in Article 7. Moreover the Commission shall contact the authorities of the supplier country concerned immediately in cases where requests notified exceed the quantitative limits in order to seek clarification and a rapid solution' (Article 12(4)). Finally, under Article 12(8), the `Commission may, in accordance with the procedure laid down in Article 17, take any measure necessary to implement this Article'.
23 Articles 7 and 8 of the regulation concern the administration of the flexibility measures concerning the quantities of imports. In particular, Article 7 provides that, provided they notify the Commission in advance, supplier non-member countries may proceed directly to make `transfers between the quantitative limits listed in Annex V' to the extent and subject to the conditions stipulated in Annex VIII. Those flexibility measures may consist in the advance use of the quantity determined for the following year (for China, that flexibility is fixed at a maximum percentage of 2%), the possibility of carrying forward a part of unused quantities to the following quota year (with a maximum percentage for China of 5%), and finally the possibility of transfers between the various categories of products. Still concerning China, the increase in the quantitative limit for each category may not exceed 17%.
24 Article 8 of the regulation, in the version in force at the time the contested decision was adopted and the present action was brought, further provides that:
`Notwithstanding Annex V, where, under particular circumstances, additional imports are required, the Commission may open up additional opportunities for imports during a given quota year. These additional opportunities for imports shall not be taken into account for the purpose of applying Article 7.
In an emergency, the Commission shall open consultations in the Committee set up in Article 17 within five working days following receipt of a request from a Member State and shall take a decision within fifteen working days calculated from the same date.
The measures provided for in this Article will be taken in accordance with the procedure laid down in Article 17.' (12)
25 Article 17 of the regulation establishes a Textile Committee composed of representatives of the Member States and chaired by a Commission representative, and provides for a consultation procedure between the Commission and the Council within that committee. The second subparagraph of Article 17(4) expressly provides that, where the Textile Committee approves a proposal of its chairman, and thus of the Commission, the Commission is to `adopt the measures proposed'.
II - Facts
26 According to the information supplied by the Portuguese Government, the Commission adopted measures on several occasions during 1995 allowing the quantitative limits and flexibility system percentages for textile products and clothes from certain non-member countries, particularly Belarus, China, India, ex-Yugoslavia, Pakistan, Sri Lanka and Vietnam, to be exceeded. (13)
27 Regarding the Chinese products covered by the decision at issue in this case, which implements `exceptional' flexibility measures, the Commission stated in a note verbale of 8 February 1996 addressed to the mission of the People's Republic of China to the Community that textile products for which the Chinese authorities had issued an export licence, despite the flexibility percentages laid down for such products having been exceeded, had already been exported to the Community and were awaiting the granting of import authorisations by the competent authorities of the Member States. The Commission stated its concerns with regard to the non-compliance with the limits laid down in the agreement with the People's Republic of China, and accordingly requested the Chinese authorities `to refrain in future from further issuing of export licences in excess of the agreed quantitative [limits]'.
28 Shortly afterwards, by a letter of 4 March 1996 addressed to the Director of Administration of Foreign Trade at the Ministry of Foreign Trade and Economic Cooperation of the People's Republic of China, the Commission requested that the computer network linking the Chinese and Community systems for transmitting data on the grant of export licences and import authorisations be intensified in order to avoid further instances of import quotas into the Community being exceeded, and proposed collaboration to allow the progressive introduction of a direct link showing instantaneously the data entered into the two systems.
29 The Chinese authorities replied by letter of 5 March 1996, maintaining that, whilst it was true that the fact that the quotas had been exceeded was due to a breakdown in the Chinese administration's computer system, other factors had helped complicate the monitoring of compliance with export quantities, more particularly the forgery of export licences and errors in the data entered into the Community system for managing import authorisations. The Chinese authorities nevertheless declared themselves willing to intensify the link between the computer systems and requested, to secure the unblocking of Chinese products already exported, that normal flexibility measures be applied to certain categories of products (categories 3A, 4, 7 and 13) and that, in respect of other categories, permission be granted to use in advance the import quantities laid down for 1996.
30 Also on 5 March 1996, the Commission convened an urgent meeting of the Textile Committee for the following day. The minutes of the committee's meeting on 6 March 1996 (14) show that the Commission proposed a series of measures to the Chinese authorities designed to intensify the link between the Chinese and Community computer systems, and that that proposal met a favourable reception from the Chinese authorities. The Commission therefore proposed that the committee should apply normal flexibility measures for the products exported in 1995 and charge the quantities in excess to those for 1996 and, for categories 3A and 4, apply the carry forward and transfer between categories. The same minutes also state that: `In the light of the reservations of certain delegations, the Commission [proposed] the charging to the 1996 quotas for all categories in excess as at 6 March 1996'. The committee gave a favourable opinion to that proposal, by a qualified majority. The Kingdom of Belgium, the Kingdom of Spain and the Hellenic Republic expressed reservations on account of the `size and repetitiveness of the excess amounts'. The Portuguese Republic voted against `by reason of opposition in principle to exceptional flexibility measures and the damage suffered by the Community industry'. (15)
31 The minutes of the meeting of the Textile Committee of 12 March 1996 show (16) that for 1995, following the favourable opinion of the committee, the Commission permitted the importation of a higher overall quantity of textile products and clothing from the People's Republic of China than was provided for in the bilateral agreement and in Regulation No 3030/93, by deducting the amount concerned from the import quantities fixed for 1996. The increases in quantity concerned eight categories of products, categories 3A, 4, 5, 6s, 21, 26, 73 and 78, with a percentage variation fluctuating between 1.1% and 11.7%.
III - Admissibility
32 The Commission argues that the application is partially inadmissible, in so far as it seeks the annulment of the `practice of exceptional flexibility measures' allegedly followed in the management of import quotas for textile products. It maintains that the action does not provide sufficient evidence of the existence of such a practice, the Portuguese Republic having merely produced a list of Commission decisions which were in reality based on different facts and legal considerations. Moreover, the applicant did not in any way challenge the legality of those decisions, thereby depriving the Commission of the opportunity to defend itself.
33 The vagueness of this part of the application seems to me to be beyond question. The applicant does not put forward any specific argument to the contrary, and appears to have alleged the illegality of the practice solely for the purpose of denouncing irregularities of the Commission in its activity monitoring quantitative limits laid down for the importation of textile products.
34 In any event, the inadmissibility of the action for annulment in question is most readily evident, in my view, from the impossibility of bringing an action before the Court under Article 173 of the Treaty in order to challenge the legality of a practice of the institutions. It is true that the Commission does not make this plea of inadmissibility until its rejoinder, and without even making any argument in support of it. However, despite the lateness and the general nature of this plea by the defendant, such a plea of inadmissibility remains relevant because it is a matter of public policy and may therefore be examined by the Court of its own motion (Article 92(2) of the Rules of Procedure).
35 It is sufficient to recall to that effect that only those acts of the institutions which produce binding legal effects may be challenged before the Court, (17) and that a practice, besides not being a source of law in the Community legal system, does not even bind the institution in whose measures or conduct repetitiveness is discernible. On that point, I would merely remark that, according to the consistent case-law of the Court of Justice, a previous practice of the institution in basing its measures on a dual legal basis cannot `create a precedent binding of the Community institutions with regard to the determination of the correct legal basis'. (18) I might add that the possibility of challenging a practice, and thus a series of successive measures, would permit avoidance of the obligation to comply with the time-limit for challenging each measure taken individually, which would clearly infringe the principle of legal certainty.
IV - Substance
The pleas on which the challenge is based
36 The action by the Portuguese Government is based on five pleas in law, namely: infringement of Regulation No 3030/93 and in particular Articles 7, 8 and 12 thereof, infringement of the basic agreement between the European Community and China, infringement of the principles on the allocation of powers and balance between the institutions, and, finally, infringement of the principle of legitimate expectations.
37 In examining those various pleas, I will not follow the order in which they were submitted by the applicant, since the third and fourth of them concern the power of the Commission to adopt the contested decision and are therefore closely linked to the first plea.
- Infringement of Regulation No 3030/93
38 In its first plea, the Portuguese Republic begins by arguing that Article 1(7) of Regulation No 3030/93, as amended by Regulation No 3289/94, provides for the progressive integration of textile products into the WTO over a period of ten years, pursuant to Article 7 of the ATC, cited above. In its submission, a decision to grant `exceptional flexibility' measures is contrary to those provisions, which were adopted in order to implement an agreement made by the Community.
39 Suffice it to say in that respect that Articles 7 and 8 of Regulation No 3030/93, which concern possibilities for temporarily amending import quotas for textile products, were not amended by Regulation No 3289/94 (as stated above, Article 8 was amended by Regulation No 824/97) and that, according to the version of those two articles currently in force, the Commission still has the power, where circumstances arise, to adopt the measures expressly envisaged by those provisions. Moreover, given the temporary nature of those measures, it is hard to see what their impact might be, during the ten-year transition period for integrating textile products in the GATT framework, on the process of progressive liberalisation of the importation of those products into the Community. (19)
40 According to the Portuguese Government, the contested decision could not be based on Article 7 of Regulation No 3030/93, since that article provides for the possibility of transfers between the various quotas only `to the extent and subject to the conditions stipulated in Annex VIII', and thus within the maximum percentage limits laid down for each form of flexibility.
41 The Commission has not disputed that argument, but confirmed that it adopted the measure in question not on the basis of Article 7 but on the basis of Articles 8 and/or 12(4) and (8) of Regulation No 3030/93.
42 The Portuguese Government also criticises that legal basis, arguing that a decision containing `exceptional flexibility' measures cannot be adopted in the context of the issuing of export licences by a non-member country when quotas laid down for importation into the Community have been exceeded. It argues in particular that Article 8 of Regulation No 3030/93, concerning exceptional measures for authorising the exceeding of quantitative limits, cannot be given a broad interpretation as that would lead to the recognition of a discretionary power in the management of import quantities fixed in the Council regulation. The exceeding of the limits authorised in Article 8 was permitted only in exceptional circumstances, which could certainly not consist in the simple infringement of the limits by a non-member country. If Article 8 had permitted authorising the increase of quotas in a case such as this, it would also have fixed a ceiling for the increase, which is not present. The Portuguese Government maintains that that argument is confirmed by the joint declaration of the Council and the Commission of 12 March 1993, concerning the Article 8 in question, (20) whereby the `particular circumstances' referred to in that article concern `trade fairs (such as the fairs in Berlin) or ... situations in which the needs of the Community industry require extra imports'.
43 Moreover, the Government submits, the Commission's power in administering such quotas is purely one of implementation and must therefore be exercised within the limits and upon the conditions defined in the provisions which the institution must apply. In accordance with that premiss, therefore, the Commission could not adopt decisions permitting the limits to be exceeded, which were not only devoid of legal basis but also constituted an alteration of the quotas fixed by the Council. Even applying the theory of implicit powers to the delegation of power enjoyed by the Commission, the Commission is still required to exercise functions directly and necessarily linked to the powers expressly allocated to it. (21) Moreover, in the context of commercial policy, where the Commission is responsible for the implementation of international undertakings, the exercise of such functions affects not only the interior of the Community but also its external relations, with the consequence that the Commission's power of implementation must necessarily be more limited than that provided for in the context of other Community policies, such as agricultural policy for example.
44 Similarly, Article 12 could not justify the adoption of the contested decision but on the contrary confirmed the Portuguese Government's interpretation of the system, since it offered the Commission the possibility of dealing in advance with the consequences of non-compliance with quotas by a non-member country; this was a situation which did not arise unexpectedly, but was on the contrary frequent and thus foreseeable. In particular, Article 12 allowed the Commission, where it suspected quotas were being exceeded, to block the automatic issuing of authorisations once 90% of the quota was reached. Moreover, Article 12(4) and (8), relied on by the Commission as the legal basis for the contested decision, were on the contrary designed to ensure compliance with quantitative limits and not to permit the granting of extra licences. In particular, the rapid solution referred to in Article 12(4) might consist in the annulment of import authorisations or the reinforcing of monitoring mechanisms.
45 The Commission argues on the contrary that its powers under Article 8 of Regulation No 3030/93 must necessarily include the power to grant extra import authorisations, especially in a case such as the present. In this case, all the conditions to justify the adoption of such a measure were met: first, the arrival on Community territory of textile products having obtained an export licence from the Chinese authorities, secondly the good faith of the traders concerned by the granting of those licences, and finally the request by certain Member States to unblock the goods held at the frontier. The Commission therefore considers that the decision was necessary to avoid the traders concerned by those imports, whose good faith the Portuguese Government has not called into question, being penalised and suffering losses capable of threatening the survival of their businesses, and to avoid a situation in which certain Member States adopted measures capable of adversely affecting the general system of quantitative restrictions established at Community level. That interpretation of Article 8 was confirmed by the new wording of the same article which, in the second subparagraph, extends the concept of special circumstances to situations in which quantitative limits are exceeded at the time of the issue of the export licences.
46 The Commission further notes that it is impossible in this case not to take account of the clearly abnormal circumstance that the exceeding of the limits was due to a breakdown of the Chinese Administration's computer system, which contained data concerning the issuing of export licences for textile products, and of the fact that the exceeding of the limits was so sudden that it was impossible to adopt preventive measures.
47 In any event, the contested decision was not limited to increasing the quotas for 1995, but also reduced the quotas anticipated for 1996 by the same quantities.
48 Finally, and contrary to the argument of the applicant, Article 8 should be interpreted broadly, taking account in particular of the provisions of Article 12(4) and (8) of Regulation No 3030/93. Article 12(4) requires the Commission, where quantitative limits have been exceeded, to contact the authorities of the non-member country to find a solution to the consequences of those limits possibly being exceeded by the supplier country. Under Article 12(8), that solution included the possibility of authorising extra imports. An act implementing normal flexibility measures could therefore not be the only possible measure, as otherwise Article 12(8) would have no meaning. That interpretation was confirmed by the case-law of the Court of Justice, whereby the implementing powers delegated by the Council to the Commission must be interpreted broadly and may thus, in a case such as the present, constitute an independent instrument of management to be used as a kind of safety valve. (22)
49 Similarly, had the appropriate measure been that provided for in Article 12(1), namely the blockage of availability once the level of 90% of the quota was reached, the Commission maintains there would have been no possible solution in this case to the problem of the excess of export licences issued by the Chinese authorities.
50 In order to assess whether the Portuguese Government's arguments are well founded, it is necessary to define the powers which the Council has allocated to the Commission in this area on the basis of the relevant provisions of the Treaty (Article 145, third indent and Article 155, fourth indent) and their specific scope.
51 By Regulation No 3030/93, the Council expressly delegated to the Commission certain functions concerning the implementation of the common commercial policy in the sector of textile imports into Community territory. In particular, and what concerns us here, it allocated to the Commission the power to manage import quotas.
52 In order to understand the scope of such a delegation, it is necessary to recall the provisions in the same regulation on quota monitoring procedures.
53 Article 12 provides that the national authorities are to notify the Commission of the quantities of requests for import authorisation and that the Commission is to confirm `that the requested amount(s) [...] are available for importation in the chronological order in which the notifications of the Member States have been received' (Article 12(1)). (23) Where there is reason to believe that anticipated requests for import authorisations may exceed the quantitative limits laid down in the regulation, the Commission may, having obtained the assent of the Textile Committee - that is to say, in accordance with the procedure laid down in Article 17 of Regulation No 3030/93 - limit the amount to be allocated to 90% of the quota in question (Article 12(1)). The notifications for which no confirmation may be given because the quantities requested are no longer available within the Community quantitative limits are kept in reserve by the Commission in the chronological order of their receipt and receive confirmation in the same order as and when new quantities become available `for example through the application of flexibilities [provided for] in Article 7'. In that event, the Commission immediately contacts the authorities of the supplier country `in order to seek clarification and a rapid solution' (Article 12(4)). Finally, under Article 12(8), the Commission may, in accordance with the procedure laid down in Article 17, `take any measure necessary to implement' the powers expressly conferred by Article 12.
54 The regulation also provides that the Commission is to monitor the exercise of the power of the authorities of non-member countries to grant export licences for quantities slightly higher than the Community quotas, while complying with the flexibility percentages fixed by the Council - and normally laid down in international agreements concluded between the Community and the various supplier countries - (Article 7 of the regulation).
55 Under Article 8 of the regulation, the Council has also conferred upon the Commission the power, `where, under particular circumstances, additional imports are required', to authorise the importation of quantities higher than those provided for in the various quotas and the additional quantities authorised under the flexibility mechanism in Article 7. The procedure for adopting those measures is that of the committee, governed by Article 17 of the regulation. In particular, `in an emergency, the Commission shall open consultations in the [Textile] Committee ... within five working days following receipt of a request from a Member State and shall take a decision within fifteen working days calculated from the same date' (Article 8, second subparagraph).
56 It is clear from the wording of those provisions that, even though they concern the implementation of a series of rules adopted by the Council, the powers allocated to the Commission in the matter of Community import quotas for textile products are not purely executory in character but contain a wide margin of discretion in favour of the Commission. (24) As is well known, the powers delegated by the Council to the Commission pursuant to the third indent of Article 145 and the fourth indent of Article 155 of the Treaty must be broadly interpreted, in the sense that they must cover all the functions necessary to implement the rules emanating from the Council. As the Court has held, the limits of that power must be sought by reference not to the literal meaning of the delegation but to the essential general aims of the legislation to be implemented. Thus the exercise of that power cannot include any modification or alteration of the basic system defined by the Council. (25)
57 In this case, contrary to what the Portuguese Government maintains, I see no obstacle at the interpretation level to recognising the Commission's power to adopt certain decisions on `exceptional flexibility measures'. The decisions in question are ones which permit the exceeding not only of the quantitative limits fixed by the Council in the regulation in question, but of the flexibility percentages in Article 7 of the regulation.
58 Article 8, concerning `additional imports', refers expressly, even if only in general terms, to decisions containing measures not provided for in Article 7, which must necessarily include authorisations for imports higher than the quantities provided for in the quotas and the additional quantities which are precisely permitted by the flexibility mechanism.
59 I have doubts, however, as to the possibility of basing that power on Article 12(4) and (8) of the same regulation, which are relied upon by the Commission as the legal basis for the contested decision. In my opinion, Article 12 concerns only the procedure for monitoring compliance with quotas and not the possibility of the Commission modifying the amount of those quotas. More precisely, Article 12(4) refers only to contacts with the authorities of the supplier country, where the latter has issued export licences for quotas that are no longer available. Such contacts cannot give rise to agreements with the authorities of non-member countries, providing for quantitative limits fixed by the Council being exceeded, since a delegation of power in that sense cannot be deduced either from the wording of Article 12 or from the system taken as a whole. Similarly, Article 12(8) does not contain such a delegation, but constitutes a general closing provision which, in my view, merely empowers the Commission to adopt measures necessary `to implement' Article 12, i.e. procedural rules concerning the management of available quotas.
60 The contested decision can therefore have been legally based only on Article 8 of Regulation No 3030/93.
61 That having been said, it has to be determined what meaning is to be given to the phrase `particular circumstances' which appears in Article 8. More precisely, it needs to be determined whether, by those words, the Community legislature intended to refer to circumstances of an exceptional nature, thereby implying that the provision in question could not be widely interpreted.
62 In that respect, there can be no doubt that the rule in question concerns the adoption of exceptional measures. By permitting quotas to be exceeded in the importation of textile products, it constitutes a derogation from what is laid down by the whole of the system governed by the regulation. The exceptional character of the provision in question is confirmed by its wording, in that it refers expressly to `particular circumstances' which justify extra imports in relation to those referred to in Annex V, namely those provided for by the Council. In that respect, I would also remark that, contrary to the Commission's observations at the hearing, the modification of Article 8 in Regulation No 824/97, which introduces into the second paragraph a number of detailed rules for authorising extra imports in cases similar to that with which we are concerned here, does not prevent the provision being exceptional in character, and even confirms it; the Council confined itself to stating certain conditions and procedural rules applicable to such authorisations and which restrict, not increase, the scope of the delegation by the Council. If, therefore, the rules in Article 8 are exceptional in character, the conditions imposed upon the power to authorise extra imports cannot be broadly interpreted.
63 It now needs to be determined, therefore, whether in this case particular circumstances exist within the meaning given, that is to say circumstances such as to justify authorisation for the issuing of extra import licences. In other words, it needs to be determined whether the issuing of an excessive number of export licences by a supplier country, the People's Republic of China, following a breakdown in that country's computer system, constitutes one of the `particular circumstances' referred to in Article 8 of Regulation No 3030/93. My answer to that question is in the negative, for a number of reasons.
64 First, the cause of the breach lies with the management of the system by the non-member country. It is thus not a case of a contingency outside the mechanism for monitoring international trade in those products, unforeseeable as the Commission maintains, but rather a risk inherent in the monitoring procedure. Secondly, the Commission has in no way proved that the irregular issuing of licences by the Chinese authorities had immediate and devastating effects, taking the Commission completely by surprise and leaving it unable to adopt appropriate corrective measures to ensure compliance with the quotas. Finally, Regulation No 3030/93, and in particular Article 12, offers the Commission the means of rapidly finding a solution to a situation such as the present. Under Article 12(1), the Commission, `in exceptional cases', where it suspects that the authorities of the supplier country have issued export licences for quantities higher than those provided for in the regulation, may `limit the amount to be allocated ... to 90% of the quantitative limits in question', allocating the remaining 10% in accordance with the procedure laid down in Article 17 and thus, in principle, after the favourable opinion of the Textile Committee. The Commission may also immediately contact the authorities of the supplier country in order to seek clarification and a rapid solution (Article 12(4)). In any event, the Commission may adopt any measure necessary for the management of quotas, within the limits fixed upon them by the Council (Article 12(8)). (26)
65 For all those reasons, I consider that this is not a case of `particular circumstances' which were alone capable of justifying the authorisation of extra imports for the purposes of Article 8, and that the Commission did not therefore have the power to adopt the contested decision.
66 Such a conclusion cannot be contested by arguing, as the Commission does, that the undertakings were acting in good faith because they acted in reliance on the export licences issued by the Chinese authorities. It seems obvious to me that an attentive trader cannot be unaware of the system, and thus of the effects of an export licence on its own. Even if, in principle, that licence is automatically followed by the import authorisation issued by the authorities of the Member States, the licence of a non-member country cannot be recognised as giving rise to the possibility of importing, and still less to the right to import, products that are subject to quotas into the Community.
- Infringement of the principle of the allocation of powers and balance between the institutions
67 The Portuguese Government argues that, by adopting a decision such as that in this case, which authorises `exceptional flexibility measures', the Commission has infringed the principle of the attribution of powers contained in Article 4(1) of the Treaty, in that it exercised functions not falling within the powers conferred upon it by the Treaty or by secondary law. In the Government's submission, that principle does not allow the Community institutions to exercise functions outside the sphere of their competence, even where they consider those functions to be necessary to achieve priority aims of Community policies.
68 Moreover, the Commission infringed the principle of institutional balance, being the corollary of the principle of legality, by arrogating to itself, under the appearance of exercising a management activity, a power that was clearly reserved for the Council under the Treaty (Articles 113(2) and 115(1) and (4)).
69 The Commission merely comments in that respect that the pleas relied upon are purely `ancillary' in character and should therefore be considered as an integral part of the first plea. It also argues that, since the contested decision did not modify the general level of the import restrictions determined by the Council and Regulation No 3030/93 empowered it to adopt measures in derogation, there has been no infringement in this case of the principle of balance between the institutions.
70 I agree with the Commission's view on that point. Those two pleas, based on infringement of the principles of the allocation of powers and institutional balance, are really concerned in this case with the Commission's non-compliance with the provisions allocating to it the power to adopt the contested decision. In my opinion, therefore, any examination as to whether they are well founded must be regarded as part of the examination concerning the infringement of Regulation No 3030/93.
71 Concerning in particular the failure to comply with the principle of the allocation of powers, I would therefore merely refer to my observations above on the infringement of Regulation No 3030/93, and in particular Article 8 thereof.
72 Concerning the principle of institutional balance, suffice it to say that a general rule of law of that sort essentially concerns the relationship between the institutions, and more particularly compliance with the reciprocal powers of the institutions. Whilst it is true that the exercise of functions by an institution that does not have the competence to perform them in itself constitutes infringement of the balance between the institutions, it is in precisely the opposite case, namely where whilst remaining within the powers conferred upon it an institution has in one way or another limited the exercise of the powers of the others, (27) that that principle really becomes relevant.
73 In this case, therefore, once it has been held that the conditions for authorising extra imports from the People's Republic of China have not been met, and the Commission did not therefore have the power to adopt the contested decision, it follows that there has also been an infringement of the two principles invoked, namely that of the allocation of powers and that of institutional balance.
- Infringement of the agreement between the European Community and the People's Republic of China
74 According to the Portuguese Government, the contested decision is incompatible with the agreement between the European Economic Community and the People's Republic of China on trade in textile products not only because it exceeded the limits expressly laid down by that agreement as regards the possibility of making advance use of quantities fixed for the following years, (28) but also because it is contrary to the logic that motivated the Council when it concluded the various extension agreements; those agreements, on the Portuguese Government's interpretation, comprised the progressive reduction of the annual rate of growth of quantities importable into the Community and a general reduction of flexibility percentages.
75 In the final analysis, that plea also amounts to a complaint concerning non-compliance with the competence allocated to the Commission for adopting a commercial policy measure such as that in this case.
76 If one examines the inconsistency, alleged by the applicant, between, on the one hand, the Community measure permitting the importation of a higher quantity of Chinese textile products into the Community than determined in the agreement with the supplier country and, on the other, that agreement, it might reasonably be thought that a unilateral measure by the Community, intended to favour the non-member country while drawing its inspiration from the liberalisation aim inherent in the agreement on trade in textile products, does not infringe any provision of that agreement.
77 In reality, in this case, the international agreement becomes an instrument for measuring the legality of the measure in relation to its internal effects for the Community, that is to say its effects in relation to the Member States who are also addressees of the contested decision. That type of analysis is clearly unavoidable, since the Member States have not participated - save in an entirely indirect manner by means of the committee procedure under Article 17 of Regulation No 3030/93 - in the decision-making process for the measure in question. In that case, a decision of the Council granting the People's Republic of China - by means of a unilateral measure or an agreement with that country - the possibility of exporting into the Community the quantities authorised in this case by the Commission, becomes a commercial policy measure independent of the agreement with China, and thus a source of law not subordinate to that agreement.
78 Once again, therefore, the basic problem concerns the existence of a delegation along those lines granted by the Council, which is the body empowered to adopt such measures under Article 113, and also concerns the scope of that delegation. For an examination of that point, I refer to my observations on the first plea, especially in points 50 to 66.
- Infringement of the principle of the protection of legitimate expectations
79 The Portuguese Government argues finally that there has been an infringement of the principle of the protection of legitimate expectations, with regard both to producers, especially those in the Portuguese textile industry, and to importers of products from other supplier countries, since a decision authorising imports not envisaged in the agreement with the non-member country frustrated expectations based on the provisions of the agreement with China. The fact that such `exceptional flexibility measures' are frequent does not, the Portuguese Government submits, do anything to diminish their unforeseeability.
80 The Commission observes in that respect, first, that the Portuguese Government has not proved that the contested measure caused damage to traders in that sector, and, secondly, that a well-informed trader could not have regarded the contested measure as an unforeseeable act. The Commission points out in that respect that, according to the case-law of the Court of Justice, traders cannot base their legitimate expectations on the continuance of an existing situation, which is liable to change.
81 In my opinion, this plea is unfounded. As the Commission has rightly argued, a provision such as the one in this case, which fixes import quantities in a general way by category of products from various supplier countries, cannot be regarded as constituting concrete and specific expectations on the part of the various traders, capable of founding a legitimate expectation in the provision in force not being changed. On the same point, moreover, I would refer to the consistent case-law whereby compliance with the principle of the protection of legitimate expectations cannot justify the immutability of a provision, especially in sectors, such as the importation of textiles, where it is necessary to adapt the rules constantly by reference to changes in the economic situation. (29)
V - The request that the effects of the annulling judgment be limited in time
82 The Commission pleads in the alternative, in the event that the action should be allowed, that the definitive effects of the contested decision be maintained in force, on the ground that temporal limitation of the effects of the judgment would avoid compromising the exercise of legal rights which the authorisation of extra imports for 1995 may have created on the part of traders and, moreover, avoid infringing the legitimate expectation created, for national authorities in particular, by the adoption of the measure and the presumption of its legality.
83 In my opinion, such a plea should be rejected, since there do not appear to be any subsisting rights or other situations in relation to third parties which might be compromised by the annulment ex tunc of the contested measure. Goods already imported into the Community on the strength of the contested decision, which are in free circulation on Community territory, can no longer be recovered. As for import rights which have not yet been exercised, assuming there are any, they are based on an unlawful measure the annulment of which does not entail consequences capable of justifying the application of the second paragraph of Article 174 of the Treaty. A change in the imports system is a risk naturally inherent in the activities of a trader, who, since he derives advantage from those activities, must also shoulder the normal risks therein (under the well-known legal principle of ubi commoda ibi incommoda). To limit the consequences of such an annulment pursuant to the second paragraph of Article 174 of the Treaty would effectively prevent the Court from removing the consequences of the illegality of contested measures ex tunc, each time those measures are capable of having an influence on the legal position of traders.
For those reasons as a whole, I propose that the Court should:
- declare the action inadmissible as regards the application for the annulment of the `practice of "exceptional flexibility" measures followed by the Commission in the administration of quantitative limits on the importation of textile products into the Community';
- annul the decision adopted by the Commission following the favourable opinion of the Textile Committee of 6 March 1996, concerning the importation of textile products originating in the People's Republic of China;
- reject the Commission's application that the effects of the contested decision should be declared final pursuant to the second paragraph of Article 174 of the Treaty;
- order the Commission to pay the costs.
(1) - The Community adhered to the Multifibres Agreement by Council Decision 74/214/EEC of 21 March 1974 concluding the Arrangement regarding International Trade in Textiles (OJ 1974 L 118, p. 1).
(2) - The protocols extending the Multifibres Agreement were concluded, respectively, on 14 December 1977, 22 December 1981, 31 July 1986, 31 July 1991, 9 December 1992, and, finally, 9 December 1993. The Community adhered to all the protocols.
(3) - OJ 1994 L 336, p. 1.
(4) - Under Article 8(1) of the ATC: `In order to supervise the implementation of this Agreement, to examine all measures taken under this Agreement and their conformity therewith, and to take the actions specifically required of it by this Agreement, the Textiles Monitoring Body ("TMB") is hereby established. The TMB shall consist of a Chairman and 10 members. Its membership shall be balanced and broadly representative of the Members and shall provide for rotation of its members at appropriate intervals. The members shall be appointed by Members designated by the Council for Trade in Goods to serve on the TMB, discharging their function on an ad personam basis.'
(5) - Council Decision 88/656/EEC of 19 December 1988 concerning the provisional application of the Agreement between the European Economic Community and the People's Republic of China on trade in textile products (OJ 1988 L 380, p. 1).
(6) - In exchange for that opportunity to export to the Community, China undertook to encourage and facilitate the importation into its market of textile products (indicated in Annexes I and II to the agreement) from the Community. Article 12(1) provides that China `will take such measures as are necessary to avoid exacerbating and if possible to reduce, during the period of application of the Agreement, the disequilibrium in its textile trade balance with the Community'.
(7) - See Article 13 of Protocol A to the basic agreement. Concerning the procedure, Article 16(2) and (3) provide that: `2. The consultation procedures referred to in this Agreement shall be governed by the following rules:
- any request for consultations shall be notified in writing to the other Party,
- the request for consultations shall be followed within a reasonable period (and in any case not later than 15 days following the notification) by a statement setting out the reasons and circumstances which, in the opinion of the requesting Party, justify the submission of such a request,
- the Parties shall enter into consultations within one month at the latest of notification of the request, with a view to reaching agreement on a mutually acceptable conclusion within one further month at the latest.
3. The community may request consultations in accordance with paragraph 2 when it ascertains that during a particular year of application of the Agreement difficulties arise in the Community or one of its regions from a sharp and substantial increase, by comparison to the preceding year, in imports of given category of Group I subject to the quantitative limits set out in Annex III.'
(8) - Concluded by the Community by Council Regulation (EEC) No 2616/85 of 16 September 1985 concerning the conclusion of a Trade and Economic Cooperation Agreement between the European Economic Community and the People's Republic of China (OJ 1985 L 250, p. 1). Article 15 of that agreement provides for the establishment of a Joint Committee composed of representatives of the two contracting parties.
(9) - OJ 1993 L 275, p. 1.
(10) - Council Regulation (EC) No 3289/94 of 22 December 1994, amending Regulation (EEC) No 3030/93 (OJ 1994 L 349, p. 85).
(11) - The People's Republic of China appears on the list of exporting countries.
(12) - In its new version, Article 8(1) and (2), as amended by Regulation (EC) No 824/97 of 29 April 1997 (OJ 1997 L 119, p. 1) read as follows:
`Where, under particular circumstances, imports over and above those referred to in Annex V are required in respect of one or more categories of products, additional opportunities for imports during a given quota year may be granted by the Commission in accordance with the procedure laid down in Article 17.
Where such additional opportunities are granted following over-licensing by the authorities of a supplier country, this shall be subject to the deduction of an amount corresponding to the additional amount from the quantitative limit:
- of one or more categories of products belonging to the same group or subgroup of products for the current quota year (provided that such an amount does not exceed 3% of the quantitative limit for the category for which the additional opportunities are granted)
and/or
- of the same category of products for the following quota year.'
(13) - See Annex I to the application.
(14) - See the minutes of the 413th meeting of the Textile Committee on 6 March 1996 (Annex III to the application).
(15) - See the minutes of the 414th meeting of the Textile Committee of 12 March 1996, p. 2 (Annex VI to the application).
(16) - See note 15.
(17) - See, for example, the judgments in Case 22/70 Commission v Council [1971] ECR 263, paragraphs 38 to 43, and Joined Cases C-181/91 and C-248/91 Parliament v Council [1993] ECR I-3685.
(18) - Judgment in Case 131/86 United Kingdom v Council [1988] ECR 905, paragraph 29; see also Case 68/86 United Kingdom v Council [1988] ECR 855, paragraph 24; Case C-426/93 Germany v Council [1995] ECR I-3723, paragraph 21; Case C-271/94 Parliament v Council [1996] ECR I-1689, paragraph 34; Case C-84/94 United Kingdom v Council [1996] ECR I-5755, paragraph 19. Moreover, in its judgment in Case C-327/91 France v Commission [1994] ECR I-3641, paragraph 36, the Court held that `a mere practice cannot override the provisions of the Treaty'.
(19) - In that respect, the ATC itself does not prohibit the adoption of flexibility measures, but merely obliges States which are parties to that agreement to not alter provisions notified to the control organisation which, pursuant to bilateral agreements under the Multifibres Agreement, were in force for the 12-month period prior to the entry into force of the WTO agreement; the application of quantitative limits to the combined use of the various forms of transfer is prohibited (Article 2(16)).
(20) - For failure to obtain the agreement of the Council, the Portuguese Government did not produce the declaration cited.
(21) - Case 121/83 Zuckerfabrik Franken [1984] ECR 2039, paragraph 13; Case C-27/89 Rozay-en-Brie [1990] ECR I-1701.
(22) - Case C-478/93 Netherlands v Commission [1995] ECR I-3081, paragraphs 30 and 32.
(23) - Notifications are sent electronically in an integrated network created for that purpose (Article 12(3) of Regulation No 3030/93).
(24) - The Court has frequently ruled that delegations of powers that are not purely executory are lawful. See the judgments in Joined Cases 188/80 to 190/80 France, Italy and United Kingdom v Commission [1983] ECR 2545, paragraph 6; Case 16/88 Commission v Council [1989] ECR 3457, paragraph 11; Case C-240/90 Germany v Commission [1992] ECR I-5383.
(25) - On that point, see the judgments of the Court in Case 23/75 Rey Soda v Cassa Conguaglio Zucchero [1975] ECR 1279, paragraph 14; and Case C-303/90 France v Commission [1991] ECR I-5315. As Advocate General Tesauro rightly pointed out in the latter case, `provisions for applying a rule comprise by definition at least a specification of the obligations entailed by the rule and thus a set of detailed rules that necessarily create a series of specific obligations', but they cannot contain any modification of the basic rules.
(26) - Such a procedure, which provides for the suspension of the issuing of import authorisations and for contacts with the authorities of the supplier country, is also provided for in the agreement between the European Economic Community and China (Article 13(1) of Protocol A annexed to the basic agreement).
(27) - I refer in that respect to the case-law of the Court concerning the obligation to consult the Parliament in the legislative procedure, which is to be regarded, in the cases provided for by the Treaty, as `an essential formal requirement breach of which renders the measure concerned void', since effective participation of the Parliament in the legislative process is regarded as `an essential factor in the institutional balance intended by the Treaty': see, inter alia, Case C-392/95 Parliament v Council [1997] ECR I-3213, paragraph 14).
(28) - Article 5 of the agreement provides for advance use of a maximum of 5% of the quantity fixed for each year.
(29) - See, finally, the judgment in Case C-315/96 Lopex Export v HZA Hamburg-Jonas [1998] ECR I-317, paragraphs 28 to 30.
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