61991J0306

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1. Tax provisions ° Harmonization of laws ° Taxes other than turnover taxes affecting the consumption of manufactured tobacco ° Article 5 of Directive 72/464 ° Scope ° Fixing of the selling price by a public authority in disregard of the principle that manufacturers and importers are free to determine it ° Not permissible ° National legislation ambiguous in regard to that principle ° Incompatible with Article 5 of the directive

(Council Directive 72/464, Art. 5)

2. Action for failure to fulfil obligations ° Subject-matter of dispute ° Determination during the pre-litigation procedure ° Subsequent extension ° Not permissible

(EEC Treaty, Art. 169)

1. Article 5(1) of Directive 72/464 lays down the principle that manufacturers and importers are free to determine the maximum retail selling prices of manufactured tobacco. Subject to the implementation of national legislation regarding the control of price levels or the observance of imposed prices, it does not authorize the Member States to fix the prices in question in disregard of that general principle.

Consequently, a Member State which retains legislation which does not expressly indicate and does not clearly entail an obligation on the part of the competent administrative authority to observe, under the conditions and within the limits laid down by the directive, the principle that manufacturers and importers are free to determine the maximum prices of manufactured tobacco imported into that State is in breach of its obligations under the aforementioned provision.

2. In the case of an action for failure to fulfil obligations, the pre-litigation stage defines the subject-matter of the dispute, which cannot subsequently be extended. The opportunity for the Member State concerned to submit its observations constitutes an essential guarantee required by the Treaty and is an essential formal requirement for the legality of the procedure for a declaration that a Member State has failed to fulfil its obligations.

In Case C-306/91,

Commission of the European Communities, represented by Enrico Traversa, of its Legal Service, acting as Agent, assisted by Alberto Dal Ferro, of the Vicenza Bar, with an address for service in Luxembourg at the office of Nicola Annecchino, of its Legal Service, Wagner Centre, Kirchberg,

applicant,

v

Italian Republic, represented by Professor Luigi Ferrari Bravo, Head of the Legal Department in the Ministry of Foreign Affairs, acting as Agent, assisted by Oscar Fiumara, Avvocato dello Stato, with an address for service in Luxembourg at the Italian Embassy, 5 Rue Marie-Adélaïde,

defendant,

APPLICATION for a declaration that, by fixing, by decrees of the Minister of Finance, retail selling prices for manufactured tobacco at a level which, by reason also of the considerable delays in the adoption of the said decrees, does not correspond to that which is requested by importers or manufacturers, the Italian Republic has failed to fulfil its obligations under Article 30 of the EEC Treaty and Article 5 of Council Directive 72/464/EEC of 19 December 1972 on taxes other than turnover taxes which affect the consumption of manufactured tobacco (OJ, English Special Edition 1972 (31 December), p. 3),

THE COURT,

composed of: G.C. Rodríguez Iglesias, President of Chamber, acting for the President of the Court, M. Zuleeg and J.L. Murray (Presidents of Chambers), G.F. Mancini, R. Joliet, F.A. Schockweiler, J.C. Moitinho de Almeida, F. Grévisse and D.A.O. Edward, Judges,

Advocate General: C. Gulmann,

Registrar: H.A. Ruehl, Principal Administrator,

having regard to the Report for the Hearing,

after hearing oral argument from the parties at the hearing on 20 January 1993,

after hearing the Opinion of the Advocate General at the sitting on 10 March 1993,

gives the following

Judgment

1 By application lodged at the Court Registry on 27 November 1991, the Commission of the European Communities brought an action under Article 169 of the EEC Treaty for a declaration that, by fixing, by decrees of the Minister of Finance, retail selling prices for manufactured tobacco at a level which, by reason also of the considerable delays in the adoption of the said decrees, does not correspond to that which is requested by importers or manufacturers, the Italian Republic has failed to fulfil its obligations under Article 30 of the EEC Treaty and Article 5 of Council Directive 72/464/EEC of 19 December 1972 on taxes other than turnover taxes which affect the consumption of manufactured tobacco (OJ, English Special Edition 1972 (31 December), p. 3, hereinafter "the directive").

2 The sale of manufactured tobacco in Italy is subject to a State monopoly. The retail selling prices of manufactured tobacco are entered in a scale. Article 2 of Law No 825 of 13 July 1965 (GURI No 182 of 22 July 1965), as amended by Law No 76 of 7 March 1985 (GURI No 65 of 16 March 1985), provides as follows:

"The inclusion of each product subject to the State monopoly in the tariffs ... and changes in that regard shall be effected by decree of the Minister of Finance in relation to the prices requested by suppliers for imported goods, after obtaining the opinion of the Administrative Board for the State Monopolies, and in relation to the prices proposed by the said Board for other goods".

3 The Commission has brought this action on the basis of Article 169 of the Treaty on the ground that, in its view, both the wording of the abovementioned national provisions and the conditions under which they were applied by the Italian authorities disregarded the requirements of Community law arising from Article 30 of the Treaty and the provisions of the directive.

4 It appears from the Commission' s written submissions that this action relates only to the manner in which the prices of manufactured tobacco imported into Italy are fixed and not to the system for fixing the prices of national manufactured tobacco.

5 Reference is made to the Report for the Hearing for a fuller account of the national provisions in question, the procedure and the pleas and arguments of the parties, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

Infringement of the directive

6 The Commission' s complaints are, first, that the actual content of Article 2 of Law No 825 of 13 July 1965 is incompatible with Article 5 of the directive, which concerns the fixing of retail selling prices of manufactured tobacco, secondly, that the practice followed by the Italian authorities in applying the abovementioned national provisions infringes Article 5 of the directive and, lastly, that the Italian authorities' failure to communicate to the Commission the main provisions of national law securing the implementation of the directive infringes Article 12(2) of the directive.

7 Those three complaints will be considered in succession. However, it is appropriate to call to mind in limine the purpose of the directive and to determine the obligations of the Member States with regard to the retail selling price of manufactured tobacco.

8 The purpose of the directive, which was adopted on the basis of Article 99 of the Treaty, is to lay down the general principles for the harmonization of the system for the taxation of tobacco, which, by reason of its characteristics, has the effect of impeding the free movement of tobacco and the establishment of normal conditions of competition in that particular market.

9 Article 5(1) of the directive provides that "manufacturers and importers shall be free to determine the maximum retail selling price for each of their products. This provision may not, however, hinder implementation of the national systems of legislation regarding the control of price levels or the observance of imposed prices."

10 As appears from the judgment of the Court in Case 90/82 Commission v France [1983] ECR 2011, paragraphs 22 and 23, the expression "control of price levels" can refer only to national legislation of a general nature intended to check the increase in prices. As for the expression "observance of imposed prices", it must be understood as referring to a price which, once determined by the manufacturer or importer and approved by the public authority, is compulsory as a maximum price and must be observed as such at all stages of the distribution network, up to the sale to the consumer (judgment in Case 13/77 GB-Inno-BM v Vereniging van de Kleinhandelaars in Tabak [1977] ECR 2115, paragraph 64). With those two provisos, the abovementioned provisions of the directive do not authorize the Member States to fix the prices of manufactured tobacco in disregard of the rule that manufacturers or importers are free to determine prices (judgment in Case C-287/89 Commission v Belgium [1991] ECR I-2233, paragraph 13).

11 Although Article 5(2) of the directive authorizes the Member States to fix a scale of retail selling prices for each group of manufactured tobaccos, the scope of those provisions is limited. Their sole purpose is to facilitate the levying of excise duty and they require each scale to have sufficient scope and variety to correspond in fact with the variety of Community products. Apart from minor adjustments necessitated by the scale, they do not derogate from the abovementioned general principle that the level of product prices is fixed by the manufacturers or importers.

Incompatibility of Article 2 of Law No 825 of 13 July 1965 with Article 5 of the directive

12 The Commission submits that the aforementioned provisions of Article 2 of Law No 825 of 13 July 1965, more specifically the words "in relation to" ("in relazione ai"), are ambiguous and suggest that the Minister of Finance has a discretion to decide on requests submitted by manufacturers or importers for the inclusion or alteration of prices in the scale. The existence of such a discretion is contrary to the principle laid down by Article 5 of the directive to the effect that manufacturers and importers are free to determine prices. The abovementioned national provisions are also incompatible with Community law on account of the involvement of the Administrative Board for State Monopolies in an advisory procedure prior to the decision of the Minister of Finance. That involvement cannot be justified by the requirements of the general control of prices, since the Board has no powers in that area, or by the need to provide technical assistance for the Minister when he classifies a product in the scale, since the Board' s opinion is required even in the case of mere requests for price increases.

13 The Italian Government contends that the wording of Article 2 of Law No 825 of 13 July 1965 is not ambiguous and merely expresses, using the rich and varied resources of the Italian language, the link which is bound to exist between the price requested by the manufacturer or importer and its inclusion in the scale. Moreover, the Court has already found that the Italian legislation is compatible with Community law in this respect in the judgment in Case 78/82 Commission v Italy [1983] ECR 1955. As for the involvement of the Administrative Board for State Monopolies, this relates, not to prices, but to the products, which have to be classified in the scale by reference to their characteristics. Accordingly, the role played by the Board is purely technical.

14 As the Court has consistently held, the principles of legal certainty and the protection of individuals require, in areas covered by Community law, that the Member States' legal rules should be worded unequivocally so as to give the persons concerned a clear and precise understanding of their rights and obligations and enable national courts to ensure that those rights and obligations are observed (see to this effect the judgment in Case 257/86 Commission v Italy [1988] ECR 3249, paragraph 12).

15 The aforementioned provisions of Article 2 of Law No 825 of 13 July 1965, as amended, do not satisfy that requirement. By stating merely that the Minister of Finance is to include imported products in the scale "in relation to" the prices requested by suppliers, the Italian Law does not clearly indicate the nature of the Minister' s powers with regard to fixing the prices of imported manufactured tobacco. It does not specify the discretion or lack of discretion available to the Minister or the extent of his obligations. In particular, it does not set forth the obligation on the Minister to allow the manufacturer or importer to determine, under the conditions and within the limits laid down by Article 5 of the directive, the prices of imported products whose inclusion in the scale is sought.

16 In order to underscore the ambiguity attaching to the use of the words "in relation to", it should be noted that they are used successively in Article 2 of Law No 825 of 13 July 1965 in two different situations. The first is where the Minister decides on a request concerning imported products whose prices have been fixed beforehand by the manufacturer or importer. The second is where, on the contrary, the Minister determines the prices of national products, which are simply proposed by the Administrative Board for State Monopolies. The Minister' s powers differ in those two situations and the exact meaning of the phrase "in relation to" is all the more difficult to define in that, if the Italian Government' s interpretation of the Minister' s powers over the prices of imported products were to be accepted, the same words would have two different meanings in the same sentence.

17 The imprecision of the Italian legislation is confirmed by the fact that no provision of the national law makes it possible to determine the purpose and aims of consulting the Administrative Board for State Monopolies, which also has the power to propose prices for national products, prior to a decision by the Minister on a request concerning imported products. There is no support in the relevant provisions for the Italian Government' s interpretation to the effect that the Board' s opinions do not relate to prices and have only a technical scope, in so far as they are merely concerned with the classification of products by reference to their characteristics.

18 Lastly, contrary to that which the Italian Government maintains, the Court did not find in the judgment in Case 78/82 Commission v Italy, cited above, that all the provisions of the Italian legislation concerning the method of fixing the prices of manufactured tobacco were compatible with Community law. In that judgment the Court merely held that the fixing by the Italian provisions of uniform trading margins for the retail distribution of manufactured tobacco was consistent with Community law. The question of the compatibility of Article 2 of Law No 825 of 13 July 1965, as amended, with Article 5 of the directive, was not considered in that judgment. Consequently, the defendant cannot successfully rely on that judgment in support of its argument that the complaint should be dismissed.

19 Consequently, it must be held that the Italian Republic has failed to fulfil its obligations under Article 5 of the directive by retaining legislation which does not expressly indicate and does not clearly entail an obligation on the part of the competent administrative authority to observe, under the conditions and within the limits laid down by the directive, the principle that manufacturers and importers are free to determine the maximum prices of manufactured tobacco imported into Italy.

Conditions for the application by the Italian authorities of Article 2 of Law No 825 of 13 July 1965 and their compatibility with Article 5 of the directive

20 On the basis of complaints made by associations of producers of manufactured tobacco products in other Member States, the Commission complains that the Italian authorities refused requests for price increases made by manufacturers and importers, or granted them after a delay, and delayed the examination of requests for the inclusion of new products in the scale of prices.

21 The Italian Government objects that that complaint is inadmissible on the ground that it was not specifically raised during the pre-litigation procedure.

22 Reference should be made to the Court' s case-law (see the judgment in Case 274/83 Commission v Italy [1985] ECR 1077) to the effect that, in the case of an action for failure to fulfil obligations, the pre-litigation stage defines the subject-matter of the dispute, which cannot subsequently be extended. The opportunity for the Member State concerned to submit its observations constitutes an essential guarantee required by the Treaty and is an essential formal requirement for the legality of the procedure for a declaration that a Member State has failed to fulfil its obligations.

23 In this case, the Commission confined itself in the pre-litigation stage to contesting the actual content of the provisions of Article 2 of Law No 825 of 13 July 1965. The existence of complaints was raised only in support of the Commission' s complaint, since the facts which gave rise to those complaints do not take the form of a separate complaint by the Commission upon which the Italian Government was called to submit specific observations in its defence.

24 In those circumstances, the Commission cannot, without disregarding the rights of defence of the Italian Government, extend its application to the conditions in which the Italian authorities applied Article 2 of the abovementioned national law with regard to certain manufacturers or importers. Consequently, that complaint is inadmissible.

Failure to comply with Article 12(2) of the directive

25 The Commission submits in the arguments set out in its application that the Italian Government failed to communicate to it, as required by Article 12(2) of the directive, the main provisions of national law implementing the directive.

26 The Court holds of its own motion that that complaint is inadmissible, since it was not set out in the letter before action and was not expressly incorporated in the form of order sought in the Commission' s application.

Infringement of Article 30 of the Treaty

27 Lastly, the Commission maintains that there has been a failure to comply with the provisions of Article 30 of the Treaty. In its view, the fact that requests presented by manufacturers or importers concerning the price of manufactured tobacco were sometimes refused or examined after a delay constitutes a measure having an equivalent effect to quantitative restrictions on imports.

28 In this respect also, it should be held that a complaint which was not specifically set forth by the Commission during the pre-litigation stage is inadmissible.

Costs

29 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs. Since the Italian Republic has failed in all essential respects, it must be ordered to pay the costs.

On those grounds,

THE COURT

hereby:

1. Declares that the Italian Republic has failed to fulfil its obligations under Article 5 of Council Directive 72/464/EEC of 19 December 1972 on taxes other than turnover taxes which affect the consumption of manufactured tobacco by retaining legislation which does not expressly indicate and does not clearly entail an obligation on the part of the competent administrative authority to observe, under the conditions and within the limits laid down by the directive, the principle that manufacturers and importers are free to determine the maximum prices of manufactured tobacco imported into Italy;

2. Dismisses the remainder of the claims;

3. Orders the Italian Republic to pay the costs.