COMMISSION RECOMMENDATION of 22 December 1969 to the French Republic on the adjustment of the import system for petroleum products, provided for in Article 37 (6) of the EEC Treaty (Only the French text is authentic) (70/128/EEC)

I

1. The French Government, by letter of 14 February 1959, informed the Commission that crude petroleum and petroleum products are in France subject to import controls of a kind referred to in Article 37 of the EEC Treaty. By letter of 13 April 1962 the Commission addressed a first Recommendation to the French Government concerning the adjustment of these import controls. That Recommendation was based on Article 155 and, in so far as applicable. on Article 37 (6) of the EEC Treaty. Subsequently, the Commission expressed the view that Article 37 applied to the import controls on crude petroleum and petroleum products. On 24 July 1963 it addressed to the Government of the French Republic a further Recommendation operative for 1963. By letter of 23 November 1963 the French Government communicated its views to the Commission with regard to that Recommendation.

2. Following the Recommendation of 1963 the French Government has taken a number of steps for the adjustment of the import system for petroleum products. (a) The import quotas for crude petroleum and petroleum products from Member States which, in accordance with the Recommendation of 1963, had been fixed at 1 650 000 metric tons have been progressively increased and in 1969 reached 3 560 000 metric tons.

(b) Authorized undertakings are no longer obliged, when carrying on their activities as distributors, to use nationally produced equipment.

In addition, when the special import permits for petroleum products were renewed by the Decrees of 26 February 1965 and 27 February 1968 certain concessions were introduced: (a) The marketing of lubricants was no longer restricted by quotas granted to each undertaking:

(b) Marketing quotas for petrol were increased:

(c) The list of authorized undertakings was extended.

3. The Commission considers, however, that, although the measures taken by the French Government constitute progress towards the establishment of a common market in petroleum products, they are not yet sufficient to ensure, in accordance with Article 37 of the EEC Treaty, that, when the transitional period has ended, the conditions under which all petroleum products of the Community are procured and marketed shall be equal and in harmony with the fundamental principles of freedom and reciprocity of trade within the common market.

Indeed, the system of quotas, the rules on the apportionment of marketing quotas incorporated in the import permits and the so-called "90 % rule" create obstacles to the free movement of crude petroleum and finished products from other Member States of the EEC and give rise to discrimination. Moreover, a number of other provisions which are not in themselves discriminatory might in certain circumstances be applied in a manner which would allow of discrimination.

4. (a) Quota system for products from other Member States

The Commission considers that the fixing of quotas, in so far as it is a restrictive measure applicable to products imported from other Member States, constitutes in itself a discrimination incompatible with the objective of liberalizing the movement of petroleum products between Member States and, more particularly, with the obligations arising from Article 37.

In the opinion of the Commission the only policy consistent with the letter and the objectives of Article 37 and the other provisions of the Chapter on the elimination of quantitative restrictions between Member States, of which Article 37 forms part, is that of abolishing all quotas for crude petroleum and finished products from other Member States.

The Commission is, however, aware that there are major differences between the policies of the States - and in particular between their commercial policies - which substantially affect intra-Community trade and investment decisions.

The Commission is aware that the effects of such differences should not be underestimated and is ready to discuss with the French Government means of mitigating these effects pending the establishment of a Community commercial policy in respect of the products in question.

(b) Fixing marketing rights

Discrimination between nationals of Member States also results from the incorporation, in import permits, of marketing rights or quotes for petroleum products. At present these forms of discrimination are as follows: (aa) With regard to import permits for crude petroleum and refining permits, the discrimination consists in the fact that crude petroleum, other than French or assimilated crude petroleum, may be imported into France for refining only in such quantity as is required for the production of the quantities of petrol (apart from aviation fuel) and of lubricants specified in the authorizing Decree. whereas neither French nor assimilated crude petroleum is subject to such restriction. Consequently, these regulations interfere with the freedom of access to the French market not only of crude petroleum originating in the Community but also of crude petroleum of third country origin which is in free circulation in one of the five other Member States.

(bb) With regard to import permits for petroleum products, the discrimination consists in the fact that the quantities of petrol (apart from aviation fuel) laid down in those permits are truly limitative only in respect of imported products. Indeed, a holder of such a permit who has marketed the whole of the amount which he is authorized to distribute under the Decree, may nevertheless exceed that limit if he refines French or assimilated crude petroleum (or if he purchases finished products made from such crude petroleum and refined in France) ; those provisions thus restrict imports of finished products from other Member States in a way which does not apply to national or assimilated products. thereby discriminating against suppliers of the latter products.

In order to end the discrimination referred to under (aa) and (bb), all quantities of finished products marketed by a permit holder must be counted against the quota granted to each undertaking.

The Commission notes that major differences remain between the energy policies of the States.

It considers that the elimination of these differences, as a matter of Community policy, would necessitate the abolition of marketing quotas.

(c) The 90 % rule

Another provision of the Decrees authorizing the refining of crude petroleum and the marketing of finished products has discriminatory effect on products from other Member States. This is the provision by virtue of which undertakings which hold a special import permit for crude petroleum and which are also holders of a special import permit for derived products (refiners/importers) are obliged to take directly from refineries subject to the special permit system, i.e. refineries established in French territory, not less than 90 % of the quantities of finished products marketed on their account in France each year.

It is clear that this provision, which covers all finished products marketed by refiners/importers, reduces very considerably the marketing in France of products refined outside France.

In the opinion of the Commission, with regard to the 90 % rule, all products refined in the Member States and marketed in France should be treated in the same way as products refined in France.

5. These considerations are based on the finding that a number of discriminatory measures are explicitly laid down in the rules and regulations in force.

The Commission has also studied the special powers available to the French Government, and in particular: (a) The right to grant and renew special permits;

(b) The provision according to which holders of special permits may be obliged to use them in a manner to be determined by the Minister responsible for fuel or by the Minister of Finance and Economic Affairs;

(c) The provision according to which holders of special permits are obliged, simply on request by the Minister responsible for fuel, to execute contracts of national interest for the acquisition of crude petroleum or petroleum products;

(d) The provision requiring importers of crude petroleum to submit their factory supply programmes each year for the approval of the Minister responsible for fuel;

(e) The provisions requiring the prior approval of the Minister responsible for fuel or of the Minister for Finance and Economic Affairs for any change in legal form, economic or financial structure, technical or financial capacity, conditions of supply, investment programme, production, membership of bodies responsible for the management or direction of import undertakings, for the asignment or acquisition of all or part of the business, and for the disposal or acquisition of any assets, as well as for any resort to the capital market or any form of association or arrangement between undertakings;

(f) Regulation of fuel distribution.

A study of those provisions indicates that the French Government has at its disposal wide and substantial powers of influence over the activities of undertakings, which might in certain circumstances be used in a manner which would allow of discrimination.

The Commission considers that an adjustment of the French petroleum system, in accordance with Article 37, requires that measures taken by the French authorities under such powers should not involve discrimination against nationals of other Member States.

II

On these grounds the Commission recommends the French Republic to take, in accordance with Article 37 (6) of the EEC Treaty, all measures necessary in order to ensure that no discrimination regarding the conditions under which goods are procured and marketed exists between nationals of Member States, in particular: - to abolish any quota system for the importation of crude petroleum and petroleum products from other Member States;

- to count all quantities of finished products marketed on the French market against the quota granted to each undertaking under a special permit;

- with regard to the rule obliging refiners to take from refineries subject to the special permit system 90 % of the products marketed on their account, to treat all products refined in Member States and marketed in France in the same way as products refined in France;

- to ensure that the measures taken under the powers referred to in 5 (a) to (f) do not involve any discrimination against nationals of other Member States.

Done at Brussels, 22 December 1969.

For the Commission

The President

Jean REY