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infringement of essential procedural requirements;

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infringement or the Treaty;

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misuse of power.

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The Commission has rounded its view upon an incorrect concept of ‘serious disturbance’

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It did not draw up in a correct manner its forecasts on the economic repercussions of the requested quota;

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It committed errors in the course or ascertaining the determinative economic facts.

(a)

With regard to the concept or ‘serious disturbance’, the applicant's criticism refers, above all, to certain comments contained in the statement of defence. We learn from these that the

Commission based its examination on the market situation as it would exist if the common external tariff were applied in full. It finds that the internal market of the Community would function with less disturbance if it were open only to imports of wine originating from third countries which were subjected to the rates of the common external tariff, and it continues: ‘In this sense therefore the admission of any imports from third countries by way of the grant of a quota creates the effect of a disturbance within the meaning of Article 25 (3), … Other important facts which the applicant in addition considers to be essential are not only unfounded but also irrelevant both from the point of view of logic and of the spirit of the provision. Their “importance” applies at most to the question whether the disturbance can be described as “serious”’.

It is on this that the applicant understandably bases its complaint that the Commission is seeking to realize an abstract pattern. The assumption that the Common Market would function with less disturbance if the common external tariff were applied amounts to a generalization and disregards the difficulties which were bound up with the establishment of the external tariff. Economic legislative measures of this kind, which are intended to apply for a comparatively long period, are always founded on fairly rough forecasts of economic development. It is precisely for this reason that the quota measures of Article 25 are provided as a corrective. But they could not attain the importance which they were intended to have if the quotas were to be considered eo ipso as disturbances. Properly speaking, the Commission must have regard to the real repercussions of a quota upon the actual market situation, and ascertain whether grave distortions are to be feared, a task made the more difficult by the fact that the concept of the market is influenced by extremely varied interests — interests of consumers and producers and national interests in maintaining traditional currents of trade.

Certain references made during the course of the oral procedure may lead one to think that the Commission's considerations were not wholly confined to an abstract examination of the system of the Treaty. Indeed, we must stress that its point of view, according to which the only circumstance in which a disturbance is not to be expected is if import prices were to exceed the level of the prices in the Common Market, can no more satisfy the requirements of an examination for the purposes of Article 25 (3) than the finding, which is conclusive in appearance only, and which is set out in the statement of reasons for the Decision, that the very fact that there exists a production which is amply sufficient makes it probable that there will be serious disturbances in the event of the grant of a quota. At most, consideration could be given to its remarks relating to the well-known overproduction and to the difficulties of finding a ready market experienced by Italian and French producers. But the overriding impression remains that a tendency to systematize and to reason in abstract terms has influenced the Commission at least to a considerable degree in its choice of starting point.

(b)

An equally unsatisfactory impression is created with regard to the way in which the Commission came to its conclusion with regard to a disturbance of the market. The applicant refers to the preamble to the Decision where the following phrase is found: ‘The grant of a tariff quota … might therefore lead to serious disturbances of the market in the goods concerned’. From this it concludes that the Commission was satisfied with a certain degree of probability, whereas its duty was to reach findings of probability amounting almost to certainty.

During me course of the oral procedure, the Commission told us that in view of

its lack of experience in matters of quotas it decided to commence by reducing imports, so that it would ascertain what repercussions would result. This admission, like the statement of reasons for the Decision, provides grounds for thinking that the criticisms of the applicant, regarding the examination of the market situation, are justified. On the other hand, however, we read elsewhere in the Commission's pleadings that above all it had endeavoured to make an economic forecast, a prediction regarding the development of the market in accordance with the principles of economic experience, and on the basis of all the known economic factors, that is to say, it had undertaken an examination of the facts, the exactness of which met the requirements of Article 25 (3).

All these remarks on the concept of serious disturbance and on the method of establishing its existence fail to give us a clear picture or provide a clear argument, but reveal instead a changing and contradictory attitude on the part of the Commission. But whether they justify the conclusion that the Commission has acted in an irregular manner is a question which I would rather leave open. In any event, I do not propose to draw any inferences from these factors with regard to the legality of the Decision.

(c)

Let us rather concern ourselves with the economic facts to see whether the Commission has started from a correct position. The decisive question is the following: Is the production of the wines concerned (that is to say, wines suitable for the manufacture of wine spirits) amply sufficient within the Community so that additional imports from third countries in 1962 would have led to a serious disturbance?

The Commission, in its argument, compared the demand of the Federal Republic of Germany for distilling wine to the production in France and in Italy (since only these countries come into consideration) of white wines capable of being distilled, and deducted from the production figures the quantities which were processed in France and Italy into spirits or in some other way and which were exported. For this purpose, it chose average figures calculated for the years 1959 to 1961 and came to the conclusion that, for the needs of German producers of spirits amounting to 1.2 million hectolitres, there was available a supply of approximately 15 million hectolitres of white wine usable for all purposes. This allowed the Commission to speak of a production which was amply sufficient.

This comparison would obviously suffice to prove a serious disturbance of the market provided that it were impossible to dispose of the 15 million hectolitres and provided that it was perfectly clear that such a market situation ought not to be aggravated by the additional importation from third countries of 450000 hectolitres of wine suitable for distilling.

But matters are not quite so simple, because on the one hand the figures quoted are in part contested and, on the other hand, the picture requires to be completed. The questions put by the Court were intended to obtain further clarification.

In the first place it should be remarked that the parties are not agreed as to the proportion of the production of white wine which comes into consideration for the purposes of the manufacture of spirits. According to the applicant, it is impossible to define exactly which white wines are suitable for distillation or to establish the quantity. The Commission emphasizes expressly that in this connexion it has relied on estimates.

Another difficulty arises with regard to ascertaining the Italian production of white wine which, for lack of any separate statistical analysis, was estimated on the basis of information received from the Italian Government and appears to be approximately one third of the total production of wine. An expert's report might possibly provide reliable explanations with regard to these two questions. I would not wish to propose that such proof be obtained, but, commencing with the figures produced and making certain necessary corrections, I should like to try to reach a conclusion.

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Since the request for a quota refers to the year 1962, it seems appropriate not to use the average figures for a number of years, but to base one's calculations upon the quantities available for the financial year 1961/62 which, according to the information of the Commission, were considerably less in France and somewhat less in Italy than those of the financial year 1960/61.

The comparative quantity of white wine capable of being distilled is thus reduced from 22 million hectolitres to approximately 20 million hectolitres (Schedules 2 and 3 to the Commission's answers).

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It should be borne in mind that the information furnished regarding the quantities used by the German producers does not refer to white wine but to distilling wine, that is, wine fortified to 22o by the addition of alcohol. With a normal alcohol level of 8.5o it follows that the demand for white wine is approximately 3 times the quantity of distilling wine (for the financial year 1961/62 approximately 4 million hectolitres.).

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In asking these questions, the court wished above all to ascertain the net surplus of white wine. For this purpose it is necessary to deduct from the quantity suitable for distillation those quantities for which another use is assured (table wine, home consumption by producers, export, processing into products other than spirits). The Commission's figures do not provide any information concerning home consumption by producers or the consumption of table wine. Even if it were correct that home consumption and consumption of table wine may be reduced by the demand for distilling wine, it is nevertheless necessary for a market analysis to contain fixed values for table wine and for home consumption, since certain quantities are in any case reserved for those purposes and withdrawn from the market in distilling wine. On this point there is obviously some difficulty owing to the lack of detailed statistics. The Commission confines itself to observing on this point that the statement in its rejoinder concerning the utilization of the production of white wine relies on estimates. It does not provide in its rejoinder or in its answers to the questions put by the Court any explanation concerning the consumption of table wine or the home consumption of producers.

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The Commission maintains that considerable quantities of wine are regularly disposed of in France by compulsory distillation, which would tend to indicate a surplus.

In reply to questions put by the Court, the Commission stated that statistics did not distinguish between the compulsory distillation of red wine and of white wine. However, in the opinion of the Commission, compulsory distillation applies more to red wine than to white wine.

We gather moreover from the rejoinder (page 9) that compulsory distillations took place during the financial year 1958/59, that is to say, after the year of the bad harvest in France which, according to the explanations of the Commission, even gave rise to the imposition of restrictions on the export of white wine suitable for distilling. This leads one to think that it is not primarily white wine which is affected by compulsory distillation.

As the applicant stresses, the Commission does not distingush between compulsory deliveries of wine alcohol and compulsory deliveries of alcohol from wine residue (husks, lees). The Order of 16 May 1959 only maintained the latter; since 1959, therefore, it has been impossible any longer to speak of compulsory distillation in the proper sense of that term.

Finally, in the proposals of the Commission with regard to the establishment of common agricultural policy ( 6 ) the prevention of the excessive pressing or grapes and the improvement of the quality of wine are given as reasons for the above compulsory deliveries of alcohol, but not efforts to eliminate existing surpluses.

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Moreover, the Commission has referred to the continuing reduction in area of French vineyards. But it could not indicate in what measure this affects white wine suitable for distillation. In addition, opposed to this argument, there is the fact that the French Decree of 20 January 1962 regarding cultivation seeks in particular to promote the production of white wines capable of being distilled.

If, therefore, the information ot the Commission does not give us any reliable assistance in resolving the problem, we must on the other hand take into account the following considerations:

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In the agricultural statistics of the Community (pages 32/33) stocks of wine in France and Italy are shown. If one compares these figures over a comparatively long period (and thus not commencing with the bad harvest of 1957), and if one relates them to the production figures, one does not find an excessive proportion or an increase of stocks which would be evidence of overproduction.

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During the course or the proceedings, the applicant has referred to the evolution of the prices of wines for distillation within the Community, which in 1962 clearly showed a tendency to rise, at the precise moment when German producers had to resort to an increasing degree to the Common Market, as a result of the rejection of the request for a quota. The figures provided by the Commission confirm this contention. In view of the fact that the wine harvest in France and Italy in 1962 was considerably greater than in the previous year (a fact which appears also from the information of the Com mission), in view or the reduction or internal customs duties, and in view of the fact that long-term agreements with Italian suppliers partially prevented price increases, it cannot be concluded that there was a considerable surplus, but rather a certain scarcity of supplies.

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Finally, the agricultural statistics of the Community make it possible to ascertain the extent to which the Community is self-supporting in respect of wine. Analogous figures appear in the proposals of the Commission for the establishment of a common agricultural policy ( 7 ) According to these figures, one finds, for the years 1953 to 1960, a degree of self-sufficiency for the EEC which has never exceeded 91.6 % and which, including the French overseas departments which principally produce red wine, varies between 75.2 and 101.7 %. According to these tables there would not appear to be a considerable surplus.

1.

Inadequacy of the statement of reasons

If one looks at the text of the Decision, disregarding that section which is not part of the preamble to the negative Decision relating to the exercise of discretionary power, essentially the following findings remain:

‘Processing industries must be supplied under conditions ensuring a rational development of production and an expansion of consumption within the Community; there is no indication that the existing market situation within the Community does not allow these branches of the industry in the Federal Republic of Germany a supply which is adequate in quantity and in quality under the same conditions applicable to other consumers within the Community.’

The applicant rightly criticizes this reasoning in two respects: on the one hand, the Commission is content to refer to ‘the existing market situation’, an expression which the Court had expressly condemned as inadequate in the judgment cited (Cases 1/57 and 14/57); on the other hand, it gives no clue as to how it balanced the various interests, whilst observing the different criteria for the exercise of its discretion laid down by Article 29, of which only one is mentioned.

We must therefore also state that there is a serious deficiency in the statement of reasons furnished in the subsidiary considerations of the Commission if, as I consider necessary, the criteria established by the case law relative to the ECSC Treaty are to retain their validity.

Although the annulment of the Decision is thus inescapable, I shall deal again, for the sake of a full treatment of the subject, with the other material complaints which have been submitted in relation to the entirely new problems raised by these proceedings.

2.

Infringement of the Treaty

3.

The varied submissions concerning misuse of power have not been examined. I think, however, that there is no necessity to discuss these matters in view of the result of my investigation so far, but also because they have in substance already been examined to a large extent at the same time as the complaint of infringement of the Treaty.