61998C0398

I - Introduction

1. By application lodged on 6 November 1998 under Article 169 of the EC Treaty (now Article 226 EC), the Commission is requesting the Court to declare that the Hellenic Republic has infringed Article 30 of the EC Treaty (now, after amendment, Article 28 EC).

2. The Commission contends that the system which that Member State applies in order to maintain the minimum level of emergency stocks of petroleum products constitutes a measure having equivalent effect to a quantitative restriction on imports.

II - Community legislation

3. Article 30 of the EC Treaty provides:

Quantitative restrictions on imports and all measures having equivalent effect shall, without prejudice to the following provisions, be prohibited between Member States.

4. Article 36 of the EC Treaty (now, after amendment, Article 30 EC) provides:

The provisions of Articles 30 to 34 shall not preclude prohibitions or restrictions on imports, exports or goods in transit justified on grounds of public morality, public policy or public security; the protection of health and life of humans, animals or plants; the protection of national treasures possessing artistic, historic or archaeological value; or the protection of industrial and commercial property. Such prohibitions or restrictions shall not, however, constitute a means of arbitrary discrimination or a disguised restriction on trade between Member States.

5. Directive 68/414/EEC (hereinafter Directive 68/414) imposed an obligation on Member States to maintain minimum stocks of petroleum products, initially fixed at 65 days' average daily internal consumption in the preceding calendar year for motor spirit, gas oil and fuel oils and increased to 90 days in 1972.

According to the preamble to Directive 68/414, a crisis in obtaining supplies could occur unexpectedly and it was therefore considered essential to establish the necessary means to make good a possible shortage. To that end, it was necessary to increase the security of supply for crude oil and petroleum products in Member States by establishing and maintaining minimum reserves of the most important petroleum products. According to Article 6 of Directive 68/414, only those quantities which would be fully at the disposal of a Member State should difficulties arise in obtaining oil supplies were to be taken into consideration, and they were required to be located within the territory of the State concerned. Those stocks could also be established, under individual agreements between Governments, within the territory of a Member State for the account of undertakings established in another Member State. The Directive left it to Member States to decide on the undertakings or bodies obliged to store those reserves.

III - National legislation

6. It is apparent from the Commission's application that in Greece the storage of the minimum stocks is regulated by Article 8(2) of Law No 1571/85, Article 482 of the Regulation on the control of goods, Article 10 of Presidential Decree No 1224/1981 and Article 15(3) of Law No 2289/95, amending Article 10 of Law No 1571/85.

7. Under those rules, the minimum stocks of petroleum products are to be kept in Greece and to be stored by the undertakings concerned in tanks owned or leased by them outside the refineries. Until the end of 1995 the undertakings were entitled to transfer that obligation, in whole or in part, to refineries in Greece while the contracts for the purchase of petroleum products which they had concluded with those refineries remained in force. The obligation to maintain the emergency stocks in their installations reverted to the undertakings concerned upon expiry of the contracts with the refineries.

8. With effect from 1 January 1996, the undertakings concerned were entitled to transfer that obligation, also in whole or in part, to refineries in Greece from which they had acquired products during the previous year, up to a total quantity equal to the volume of products of each category which the refineries had supplied to them during a 90-day period in the previous year.

9. The Greek market in petroleum products is structured on three levels: on the first level, the refineries sell refined products to marketing undertakings. Under Article 8(2) of Law No 1571/85, the refineries operating in Greece are not entitled to sell petroleum products directly, without having recourse to those undertakings, except as provided for in Article 6(3) of that Law, which refers to supplies to the armed forces.

On the second level, the marketing undertakings, which in turn are responsible for storing the emergency stocks, may acquire products from the refineries or import them and are responsible for supplying the petrol stations.

On the third level are the petrol stations, which can neither import petroleum products nor acquire them directly from the refineries, but must purchase them from the marketing undertakings.

IV - Pre-litigation procedure

10. In September 1992, the Commission advised the Greek authorities that certain aspects of the system applicable to petroleum in Greece, as amended by Law No 2008/92, might be incompatible with Community law. It stated, in particular, that certain provisions of the system applicable to the compulsory maintenance of emergency stocks might be contrary to Article 30 et seq. of the EC Treaty.

11. Following a lengthy exchange of correspondence and a series of bilateral meetings, the Greek authorities informed the Commission in May 1994 of the works undertaken for the purpose of amending the legislation on the storage and distribution of petroleum products. In December 1994 they notified the Commission of a Bill designed to amend Article 10 of Law No 1571/85, as amended by Law No 1769/88 and Law No 2008/92; that Bill became Law No 2289/95 at the beginning of 1995.

12. In September 1995, the Commission sent the Greek authorities a formal notice stating that, despite the amendments, the abovementioned legislation still appeared to be contrary to Article 30 and requesting that they submit their observations on various aspects of the system in question.

The Government replied in December 1995 and stated that the system applicable to petroleum products in Greece was consistent with Article 30 of the Treaty, that it did not discriminate between domestic products and imported products and that it had no influence on the price of petroleum.

13. That disagreement was discussed at a bilateral meeting held in Athens in June 1996, following which, in July 1996, the Greek authorities sent the Commission a letter to which was annexed a draft amendment of Article 15(3) of Law No 2289/95. The amendment appeared to consist solely in the deletion of the second subparagraph of that provision, which had no longer been in force since 31 December 1995.

14. The Commission was not convinced by the reasons put forward by the Greek authorities and in June 1997 it sent them a reasoned opinion requesting them to submit their observations within two months. The Government replied through its Permanent Representation to the European Union and maintained its previous argument.

V - Procedure before the Court

15. As I said originally, the Commission lodged its application for a declaration that the Hellenic Republic had failed to fulfil its obligations on 6 November 1998. The defence was registered at the Registry of the Court of Justice on 18 February 1999. Those documents were duly supplemented by a reply on 19 March 1999 and a rejoinder filed on 1 June 1999.

16. The hearing on 21 September 2000 was adjourned by the President of the Chamber on the ground that the representative of the Greek Government was unable to provide specific answers to the questions put to him. The Court requested details of the petroleum marketing companies' storage capacity and of the extent to which those companies were structurally dependent on the refineries.

The secretariat of the Court of Justice sent the questions to the Greek Government on 5 October 2000 and requested a reply in writing within 10 days. A copy of the reply was given to the Commission, which was requested to submit its observations within similar period. In the light of the information provided, the Court considered that there was no need to resume the hearing, the parties having given their consent, and on 10 January 2001 the President of the Chamber adopted the decision to continue the oral procedure.

VI - Examination of the plea in law: infringement of Article 30 of the Treaty

17. The Commission's action is based on a single plea in law. It claims that the system devised by the Hellenic Republic in order to comply with the obligation imposed by Directive 68/414, as amended by Directive 72/425, to maintain a minimum level of stocks of specific petroleum products for 90 days, is contrary to Article 30 of the Treaty, in so far as the possibility which it offers the undertakings responsible for storing those products to transfer the obligation to do so to refineries in Greece is linked with the amounts they have acquired from those refineries in the previous year.

It contends that that constitutes a measure having equivalent effect to a quantitative restriction on imports, which in the present case is aggravated by the fact that petrol stations are unable to obtain supplies directly from the refineries or to import them from abroad.

18. I shall first consider whether the Greek system for maintaining emergency stocks of petroleum products constitutes a measure having equivalent effect to a quantitative restriction on imports and, if so, then examine the grounds on which it might be justified and proportionate.

A. Infringement of Article 30 of the EC Treaty

19. The Commission contends that the Greek system is capable of impeding intra-Community trade in petroleum products. Under the domestic regulations the marketing undertakings operating in Greece are required to store the emergency stocks in Greece. In order to do so they may choose between keeping them in their own storage tanks or placing them in the installations of the national refineries, with which they must conclude a contract of supply.

The Commission does not criticise the fact that the emergency stocks are stored in the refineries. However, it considers that the obligation which the undertakings are required to assume in return, namely to acquire products from those refineries, constitutes an obstacle to the free movement of goods. In practice, a manifest discrimination is established in favour of domestic products and against foreign products, since imports of petroleum products, although not prohibited, are strongly discouraged: if a marketing undertaking obtains supplies in other Member States, it loses the advantage of being able to leave it to the refineries to maintain those stocks.

Last, the Commission claims that the restrictive effect on imports is intensified because the marketing undertakings are in a monopoly situation vis-à-vis the petrol stations, which are not entitled to import the products concerned from other States or to purchase directly from the refineries.

20. The Hellenic Republic accepts that the storage system which it introduced in order to comply with Directive 68/414 is as the Commission describes in its submissions. However, it denies that it is contrary to Article 30 of the Treaty. It contends that the presumed financial advantage for the marketing undertakings lies not in the lower storage cost but in the additional commercial advantages which the refineries offer them. It claims that if the possibility of having the emergency stocks stored by the refineries did not exist, it is doubtful that Greece would be able to comply with its obligation to maintain them at the prescribed minimum levels.

The defendant Government argues that the system in force does not give rise to any discrimination, either in fact or in law, either real or potential, against imports, since it affects the marketing of domestic products and imported products in the same way. It contends that the storage of the emergency stocks is not transferred to the refineries because of the legislation criticised by the Commission, but that it responds to market conditions which may be explained by three distinct factors: first, the refineries are connected by pipeline with the majority of the large installations owned by the marketing undertakings, so that direct supplies can be provided at a low cost; second, the refineries are situated near the large centres of consumption and the national market is characterised by the concentration of consumers in the country's two large conurbations, Athens and Salonika, to which the products are distributed from terminals at which road tankers are loaded; and, finally, the refineries are able to supply, on time and in small quantities, the amounts required by the marketing undertakings' low-capacity regional installations scattered throughout the country.

The Government states that the legislation applicable to petrol stations does not prohibit them from purchasing directly from foreign undertakings, provided that the latter have stocks of petroleum products in Greece. Furthermore, it is physically impossible for petrol stations to import the products which they sell from other Member States, for a number of reasons: first, Greece has no land frontiers with those States; second, it would be necessary to charter a tanker to transport the products, since road tankers cannot be carried on ferries for safety reasons and the cost would be prohibitive; third, the products would have to be discharged in purpose-built installations and stored in the petrol stations; and, last, the petrol stations clearly lack the technical infrastructure and financial resources to engage in operations of that type, even on the assumption that they would lead to financial advantages.

21. According to the wording of Article 30 of the Treaty, all quantitative restriction on imports and also measures having equivalent effect are prohibited between Member States. The Court of Justice held in Dassonville that all trading rules enacted by Member States which are capable of hindering, directly or indirectly, actually or potentially, intra-Community trade are to be considered as measures having an effect equivalent to quantitative restrictions.

22. I should emphasise at the outset that the Greek system for the maintenance of a minimum level of petroleum stocks does not affect domestic products and imported products in the same way, since the marketing undertakings are able to avoid the obligation to store products when they obtain supplies from Greek refineries but cannot do so when they acquire petroleum products from refineries in other Member States.

23. The possibility of transferring to the refineries the obligation to store the emergency stocks undoubtedly gives rise to a series of advantages for the marketing undertakings. The Greek Government itself has explained that in great detail in its defence, by analysing the two options open to those undertakings, which differ as regards both the legal position and the financial consequences.

24. As regards the legal position, if the undertakings choose to maintain the emergency stocks in their own tanks or in leased tanks, they own the products and are responsible for their quality and quantity. If, on the other hand, they decided to transfer the obligation to do so, the refineries will own the products in question and will be responsible for keeping them in good condition.

25. As regards the financial consequences, if the undertakings store the products they bear the risk of a fall in petroleum prices, the cost of storage, any fluctuations in the exchange rate, the costs associated with security, vigilance and management, which will vary in proportion to the quantities stored, the risk of loss due to evaporation or other causes and the risk of deterioration in quality or other associated risks. If, on the other hand, they transfer the obligation, the refineries assume all the risks and costs of storage. Those costs and risks are evaluated and included in the total storage costs, which are incorporated in the price of the products which the refineries sell to the marketing undertakings, which, in turn, pass them on to the consumer.

26. However, under the Greek system which the Commission considers to be incompatible with Article 30 of the Treaty the marketing undertakings are able to transfer the obligation to maintain the emergency stocks to the national refineries only on condition that they obtain supplies from those refineries, in a quantity equal to the volume of products of each category which the refineries have supplied to them over a 90-day period in the previous year.

Since, on the one hand, economic logic encourages the marketing undertakings to transfer storage to the refineries and, on the other hand, the transfer is subject to the obligation to obtain supplies from the same refineries, there arises a situation in which those undertakings are required to obtain supplies from the refineries in Greece. That amounts, in short, to a clear and unequivocal incitement to buy domestic products.

27. The figures produced at the hearing confirm that assessment. The parties are agreed that the marketing undertakings lack sufficient space to cope with the stocks. However, it is demonstrated that they by no means use the available capacity. In answer to the written question put by the Court after the hearing had been adjourned, the Greek Government stated that in 1997 the 34 marketing companies operating in Greece had a total storage capacity of 1 257 000 m3, equivalent to approximately 1 070 000 tonnes. The emergency stocks which they were required to store in 1997 came to a total of 2 165 000 tonnes, which in practice means that in order to comply with their obligation, if they had used their own capacity, they would have needed to have recourse to the refineries so that the latter could store, on their behalf, something over half that quantity, or approximately 1 095 000 tonnes. However, it is apparent from the Greek Government's written answer that between April 1997 and March 1998 those undertakings actually stored an average of 227 000 [tonnes], representing a little over 10% of their amount they were required to store, while the three refineries operating in Greece stored the remainder, a total of 2 028 000 tonnes.

28. In short, although it is lawful to grant marketing undertakings the possibility of transferring the obligation to store emergency stocks to the Greek refineries, it is not lawful to make such transfer conditional upon their acquiring petroleum products from those refineries. That obligation to purchase from the refineries constitutes discriminatory treatment of products from refineries in the remaining Member States, since it makes it difficult to market such products. If the marketing undertakings wish to obtain petroleum products in other Member States, the Greek regulations effectively deprive them of all the advantages conferred by the transfer of the storage.

29. Therefore, the Greek system of maintaining safety stocks is capable of hindering intra-Community trade, at least indirectly.

30. The defendant Government maintains that the storage scheme does not place obstacles in the way of imports since, if it did, the marketing undertakings would use all the available storage facilities at their own premises and, as regards the remainder, only obtain supplies from the refineries in Greece.

31. I do not subscribe to that reasoning. The marketing undertakings determine their purchasing policy decision on the basis of a number of factors, one of which is the cost of storage. The Greek undertakings would import petroleum products and use all the available storage facilities at their own premises before acquiring petroleum products from the Greek refineries only where the difference between the prices of domestic products and imported products made up for the loss of the advantages conferred by transferring the storage of the emergency stocks in the conditions indicated.

32. I should point out that the applicability of Article 30 of the Treaty to a national measure for the general regulation of commerce cannot depend on such a purely fortuitous factual circumstance, which may, moreover, change with the passage of time, and that the principle established in Dassonville has the effect that a commercial regulation constitutes a measure having an effect equivalent to a quantitative restriction on imports where it is merely capable of hindering, albeit merely potentially, intra-Community trade.

33. As the Commission quite rightly points out in its reply, what is relevant in the present case is that the Greek rules on the maintenance of a minimum level of stocks of petroleum products are capable of hindering imports.

As the Court of Justice has held, a measure having equivalent effect to a quantitative restriction may consist in: national legislation which treats domestic products differently from imported products; a provision which renders imports more difficult or burdensome than internal transactions; or even a measure whereby the State merely encourages the purchase of domestic products and which, while not binding, is capable of influencing the conduct of traders and consumers in a Member State and thus of frustrating the aims of the Treaty.

34. However, irrespective of the situation as regards prices, the system in question, conferring as it does advantages when the emergency stocks are stored in the refineries, is susceptible of encouraging the marketing undertakings to acquire domestic petroleum products and of dissuading them from importing those products from other Member States.

35. Having reached that conclusion, I consider that there is no need to examine whether the restrictive effects of the legislation in issue on the free movement of goods are intensified because the petrol stations are unable to purchase directly from the refineries or import from another Member State.

36. For the reasons stated, I agree with the Commission that the Greek legislation establishing the system for the storage of the minimum level of stocks of petroleum products constitutes a measure having equivalent effect to a quantitative restriction on imports within the meaning of Article 30 of the Treaty.

B. Justification for the restriction on the free movement of goods

37. As we know, Article 36 of the Treaty allows a Member State to maintain or introduce measures prohibiting or restricting trade if those measures are justified on, inter alia, grounds of public morality, public policy, public security or the protection of health and life of humans, and provided that they do not constitute a means of arbitrary discrimination or a disguised restriction on intra-Community trade.

38. The Court of Justice has consistently held that national rules which are contrary to Article 30 of the EC Treaty can be justified only if they satisfy one of the grounds of general interest set out in Article 36 or, where appropriate, when, applied to domestic and imported products without distinction, they may be recognised as being necessary in order to satisfy mandatory requirements relating in particular to the effectiveness of fiscal supervision, the protection of public health, consumer protection and the fairness of commercial transactions.

The Court of Justice has held, moreover, that national rules or practices adopted in order to achieve one of the objectives referred to in Article 36 of the EC Treaty are compatible with that Treaty only in so far as they do not exceed the limits of what is appropriate and necessary in order to achieve the desired objective. If a Member State is able to choose between various means, each of which is an appropriate means of achieving the same end, it will have to choose the one that least hinders freedom of trade.

39. The Commission proceeds on the basis that the legislation in issue affects domestic and imported products differently, and contends that in the present case none of the grounds which according to Article 36 may justify an exception to the principle of free movement of goods applies. In its view, the objective pursued by the Greek authorities, namely to ensure continuity in the supply of petroleum products, can be achieved by less restrictive means. It proposes that Article 10 of Law No 1571/85, as amended by Article 15 of Law No 2289/95, be deleted, so that the commitment given by the purchasing undertaking to purchase supplies from the refinery is not linked with the transfer of the obligation to store the emergency stocks. That provision could be replaced by a different provision allowing the undertakings to lease the installations which they need for storage from the refineries without being obliged to purchase their products. Since a means which would provide less of an obstacle to the free movement of goods and which would enable the general interest pursued to be protected exists, the Commission contends that the Greek legislation is disproportionate.

40. The Greek Government, on the other hand, claims that the legislation in issue is not discriminatory. By way of justification, it contends, first, that the refineries' fundamental right to economic freedom would be excessively restricted if they were required to store the minimum stocks, thus assuming the marketing undertakings's obligation, if the latter were not required in return to purchase the products which the refineries sell.

Second, it contends that it is in the general interest that the marketing undertakings are not entitled to lease tanks in the refineries in order to store the minimum emergency stocks and that that general interest cannot be achieved by less rigorous means.

41. I agree with the Commission that the Greek system for the storage of minimum levels of stocks of petroleum products does not affect domestic and imported products in the same way, since, as has been demonstrated throughout the proceedings, the marketing undertakings may be released from the obligation to store when they obtain supplies from the refineries in Greece, whereas that option is not available when they acquire petroleum products from refineries in other Member States.

For that reason it will be necessary to examine, as grounds which may justify the discrimination, only the grounds of general interest set out in Article 36. As construed by the Court of Justice in its case-law, that provision, in so far as it constitutes a derogation from the basic rule that all obstacles to the free movement of goods between Member States are to be eliminated, must be interpreted restrictively, and the exceptions listed therein cannot be extended to cases other than those specifically laid down. By way of example, and without intending to be exhaustive, the Court of Justice has rejected as justification, because they are not expressly provided for in Article 36, the protection of consumers, the fairness of commercial transactions and the protection of creativity and cultural diversity in the realm of publishing.

42. The defendant Government submits as grounds for the application of the present arrangement the economic freedom of the refineries and the risk for their operating capacity, since it is apparent that if the marketing undertakings were no longer required to obtain supplies from the refineries in order to be able to transfer the obligation to store the emergency stocks, that would jeopardise the distribution system of an industrial unit vital which is vital for national security and the continuous supply of petroleum products could not therefore be guaranteed.

43. The economic freedom of refineries or of undertakings in general is not among the grounds listed in Article 36 of the Treaty and, for that reason, it must be rejected as such. In any event, I consider that the Commission's proposal does not adversely affect that freedom, since it does not attempt to force the refineries to assume the obligation to store the products but merely intends to remove the present link between the transfer of that obligation and the acquisition of petroleum products from the same refinery, in such a way that the storage of petroleum products will be governed by the laws of the market and of free competition.

44. As regards the risk for the distribution system of an industrial unit which is vital for national security, I am of the view that the defendant Government has not shown that, in order to protect national security, it is essential to link the transfer of the storage to the obligation to acquire the products. I myself see no reason why, if under the present system the refineries can store their own products, they cannot, under a system governed by the laws of the market and of free competition, store the products which the marketing undertakings acquire from other Member States.

45. The Greek authorities further submit that, if the refineries' storage capacity were reduced, their operational flexibility would be affected, leading to higher production costs, so that consumers would be penalised by higher prices, at the best of times, and to a shortage of products in time of crisis. They also assert that, because long-distance transport is involved, it would be unprofitable to supply the islands, since they consume small quantities of petroleum products. However, those reasons cannot be subsumed into any of the grounds of general interest set out in Article 36 of the Treaty, since, according to settled case-law, that provision relates to measures of a non-economic nature.

46. Last, the defendant Government asserts that without the production of the Greek refineries, it would be impossible to supply the armed forces with the special fuels which they use and which the marketing undertakings would be unable to sell to them. However, I am unable to see that the Commission is attempting to make the Greek refineries would cease to operate. In any event, to my mind it is not essential in order to preserve the public security of a Member State that the fuels used by its armed forces must necessarily be produced or supplied by the national refineries.

47. In Campus Oil, the Court of Justice ruled that national rules that required all importers to purchase a certain proportion of their requirements of petroleum products from a refinery situated in the national territory constituted a measure having equivalent effect to a quantitative restriction on imports. It further ruled that a Member State, in that case Ireland, which was totally or almost totally dependent on imports for its supplies of petroleum products might rely on grounds of public security within the meaning of Article 36 of the Treaty for the purpose of requiring importers to cover a certain proportion of their needs by purchases from a refinery situated in its territory at prices fixed by the competent minister on the basis of the costs incurred in the operation of that refinery, if the production of the refinery could not be freely disposed of at competitive prices on the market in question.

None the less, the quantities of petroleum products covered by such a system must not exceed the minimum supply requirements without which the public security of the State concerned would be affected or the level of production necessary to keep the refinery's production capacity available in the event of a crisis and to enable it to continue to refine at all times the crude oil for the supply of which the State had entered into long-term contracts.

48. To my mind, the arguments which the Hellenic Republic puts forward in the present proceedings in order to justify its legislation on grounds of national security lack the force of those put forward at the material time by the Irish Government in order to justify national legislation which adversely affected imports of petroleum products into Ireland and which convinced the Court of Justice that one of the justifying grounds set out in Article 36 of the Treaty was present.

49. Accordingly, I also agree with the Commission that in the present case none of the grounds of general interest set out in Article 36 as justifying reasons are present. The Commission's action is therefore well founded.

VII - Costs

50. Since the grounds formulated by the Commission must be upheld, the Hellenic Republic must be ordered to pay the costs of the case, in accordance with Article 69(2) of the Rules of Procedure.

VIII - Conclusion

51. In the light of the foregoing considerations, I propose that the Court should:

- declare that the Hellenic Republic has failed to fulfil its obligations under Article 30 of the EC Treaty (now, after amendment, Article 28 EC) by establishing and maintaining a system for the storage of the minimum level of stocks of petroleum products which allows the undertakings devoted to the marketing of those products to transfer their obligation to store them to the refineries established in Greece from which they have acquired products throughout the previous year up to a quantity equal to the volume of products which each refinery has supplied to them in a given period;

- order the Hellenic Republic to pay the costs.