Re Emergency Stocks of Petroleum Products: E.C. Commission v. Greece

(Case C-398/98)

Before the Court of Justice of the European Communities (Fifth Chamber)

ECJ (5th Chamber)

(Presiding, Jann P.C.; Edward ( Rapporteur), La Pergola,

Sevón and Wathelet JJ.) Dámaso Ruiz-Jarabo Colomer, Advocate General.

25 October 2001

H1 Action for a declaration under Article 169 of the E.C. Treaty (now

Article 226 E.C.). H2 Member States--obligations--compliance with Community law--imports--oil-- Directive 68/414--Member States obliged to maintain minimum stocks of oil and petroleum--Greek legislation requiring minimum stocks to be maintained by petroleum marketing companies--marketing companies entitled to store stocks at refineries in Greece where they had bought products from those refineries during the previous year--such entitlement discriminating against refineries established in other Member States--measure equivalent to quantitative restriction under Article 30 (now Article 28 E.C.)--measure not justified under Article 36 (now Article 39 E.C.) as pursuing a public security objective--failure by the Greek Government to fulfil its obligations under Article 30. H3 Directive 68/414, as amended, imposed an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products. Under the original Greek rules implementing this obligation, the minimum stocks of petroleum products were to be stored by petroleum marketing companies outside refineries. However, since January 1996, the marketing companies had been entitled to transfer their obligation to refineries in Greece where the companies had bought products at those refineries during the previous calendar year. The extent to which they were entitled to transfer their obligation was related to the volume of products bought from the refineries. The Commission considered that this system, under which the marketing companies received a benefit as a result of purchasing products from Greek refineries, discriminated against refineries in *1618 other Member States and therefore constituted an obstacle to the free movement of goods. The Greek Government argued, inter alia, that any such

obstacle was justified by a public interest objective, namely the maintenance of security of supply of petroleum products, and was therefore covered by Article 36 (now, after amendment, Article 30 E.C.). Held: System for maintaining emergency stocks of petroleum products constituting an unjustified obstacle to the free movement of goods H4 (a) It was advantageous for the marketing companies to be able to transfer the obligation to store petroleum products to refineries. However, under the legislation at issue in these proceedings, marketing companies were only able to benefit from this advantage if they obtained a significant part of their supplies from refineries established in Greece. This system discriminated against petroleum products from refineries in other Member States and, accordingly, constituted a measure having equivalent effect to a quantitative restriction on imports within the meaning of Article 30. [22]-[27] Procureur du Roi v. Dassonville (8/74): [1974] E.C.R. 837, [1974] 2 C.M.L.R. 436, noted. H5 (b) National rules adopted in order to achieve one of the objectives listed in Article 36 were only compatible with the Treaty in so far as they were appropriate and necessary in order to achieve that objective. The Greek Government had argued that the measures in question could be justified in the interests of public security. While the maintenance on national territory of a stock of petroleum products, thereby allowing continuity of supply, was capable of constituting a public security objective, the arguments advanced by the Greek Government were purely economic. They were therefore incapable of serving to justify a quantitative restriction within the meaning of Article 30 of the E.C. Treaty (now Article 30 E.C.). Furthermore, it would have been possible to achieve the objective of public security by less restrictive measures. The Greek Government had, therefore, failed to fulfil its obligations under Article 30. [28]-[32] E.C. Commission v. Italy (128/89): [1990] E.C.R. I-3239; [1991] 3 C.M.L.R. 720; Campus Oil Ltd and Others v. Minister for Industry and Energy and Others (72/83): [1984] E.C.R. 2727; [1984] 3 C.M.L.R. 544, followed. H6 Representation D. Triantafyllou and O. Couvert-Castéra, acting as Agents, with an address for service in Luxembourg, for the applicant, the E.C. Commission. *1619 P. Mylonopoulos and N. Dafniou, acting as Agents, with an address for service in Luxembourg, for the defendant, Greece. H7 Cases referred to in the judgment: 1. Procureur du Roi v. Dassonville (8/74), 11 July 1974: [1974] E.C.R. 837; [1974] 2 C.M.L.R. 436. 2. E.C. Commission v. Italy (128/89), 12 July 1990: [1990] E.C.R. I-3239; [1991] 3 C.M.L.R. 720. 3. Campus Oil Ltd and Others v. Minister for Industry and Energy and Others (72/83), 10 July 1984: [1984] E.C.R. 2727; [1984] 3 C.M.L.R. 544.

H8 Further cases referred to by the Advocate General: 4. E.C. Commission v. Greece (C-391/92), 29 June 1995: [1995] E.C.R. I-1621; [1996] 1 C.M.L.R. 359. 5. Association des Centres Distributeurs Edouard Leclerc and Others v. "Au Ble Vert" Sarl and Others (229/83), 10 January 1985: [1985] E.C.R. 1; [1985] 2 C.M.L.R. 286. 6. E.C. Commission v. Italy (95/81), 9 June 1982: [1982] E.C.R. 2187. 7. E.C. Commission v. Ireland (249/81), 24 November 1982: [1982] E.C.R. 4005; [1983] 2 C.M.L.R. 104. 8. R. v. Secretary of State for the Home Department; Intervener, Generics (UK) Ltd, Ex parte Evans Medical Ltd and Another (C-324/93), 28 March 1995: [1995] E.C.R. I-563; [1996] 1 C.M.L.R. 53. 9. Rewe v. Bundesmonopolverwaltung für Branntwein (120/78), 20 February 1979: [1979] E.C.R. 649; [1979] 3 C.M.L.R. 494. 10. E.C. Commission v. Denmark (302/86), 20 September 1988: [1988] E.C.R. 4607. 11. E.C. Commission v. Italy (C-128/89), 12 July 1990: [1990] E.C.R. I-3239. 12. Officier Van Justitie v. de Peijper (104/75), 20 May 1976: [1976] E.C.R. 613; [1976] 2 C.M.L.R. 271. 13. Bauhuis v. Netherlands (46/76), 25 January 1977; [1977] E.C.R. 5. 14. E.C. Commission v. Ireland (113/80), 17 June 1981: [1981] E.C.R. 1625; [1982] 1 C.M.L.R. 706. 15. E.C. Commission v. Italy (103/84), 5 June 1986: [1986] E.C.R. 1759; [1987] 2 C.M.L.R. 825. 16. Duphar BV and Others v. Netherlands (238/82), 7 February 1984: [1984] E.C.R. 523; [1985] 1 C.M.L.R. 256. 17. E.C. Commission v. Italy (95/81), 9 June 1982: [1982] E.C.R. 2187. 18. Re Quantitative Restrictions on Imports of Pork Products into Italy: E.C. Commission v. Italy (7/61), 19 December 1961: [1961] E.C.R. 317; [1962] C.M.L.R. 39. *1620

Opinion of Advocate General Ruiz-Jarabo Colomer

Introduction A1 By application lodged on 6 November 1998 under Article 169 of the E.C. Treaty (now Article 226 E.C.), the Commission is requesting the Court to declare that Greece has infringed Article 30 of the E.C. Treaty (now, after amendment, Article 28 E.C.). A2 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.

Community legislation A3 Article 30 of the E.C. Treaty provides: Quantitative restrictions on imports and all measures having equivalent effect shall, without prejudice to the following provisions, be prohibited between Member States. A4 Article 36 of the E.C. Treaty (now, after amendment, Article 30 E.C.) 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. A5 Directive 68/414 [FN1] (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. [FN2] FN1 Council Directive 68/414 imposing an obligation on Member States of the EEC to maintain minimum stocks of crude oil and/or petroleum products ([1968] O.J. Spec. Ed. 586). Council Directive 98/93 amending Directive 68/414 ([1998] O.J. L358/100) gave Member States until 1 January 2000 to adapt their domestic legislation and made a number of significant amendments to Directive 68/414. FN2 Council Directive 72/425 amending the Council Directive of 20 December 1968 imposing an obligation on Member States of the EEC to maintain minimum stocks of crude oil and/or petroleum products ([1972] J.O. L291/154). It was repealed by Directive 98/93. 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 reserved of the most important petroleum products. [FN3] According to Article 6 of Directive 68/414, only *1621 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.

FN3 Second and third recitals of the preamble.

National legislation A6 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, [FN4] 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. FN4 In para. 34 of the defence, the Greek Government states that that Regulation has no Article 482, without giving any further explanation. The Commission does not appear to have corrected that information in its reply. I see, however, that that provision was already cited as part of the Greek legislation incompatible with Article 30, both in the final paragraph of p. 5 of the formal notice and in para. 8 of the reasoned opinion which the Commission sent to the Greek Government, and that the latter also failed to inform the Commission of its error in the documents which it submitted throughout the pre-litigation procedure. A7 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. A8 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. A9 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 *1622 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.

Pre-litigation procedure

A10 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 E.C. Treaty. A11 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. A12 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. A13 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 sub-paragraph of that provision, which had no longer been in force since 31 December 1995. A14 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.

Procedure before the Court A15 As I said originally, the Commission lodged its application for a declaration that Greece had failed to fulfil its obligations on *1623 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. A16 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.

Examination of the plea in law: infringement of Article 30 of the Treaty A17 The Commission's action is based on a single plea in law. It claims that the system devised by Greece 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. A18 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.

Infringement of Article 30 of the E.C. Treaty A19 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. *1624 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. A20 Greece 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; secondly, 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 *1625 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; secondly, 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; thirdly, the products would have to be discharged in purpose-built installations and stored in the petrol stations; and, lastly, 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. A21 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 Case 8/74, Procureur du Roi v. Dassonville [FN5] 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. FN5 Case 8/74, Procureur du Roi v. Dassonville: [1974] E.C.R. 837; [1974] 2

C.M.L.R. 436, para. [5]. A22 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. A23 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. A24 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. A25 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 *1626 the other hand, they transfer the obligation, the refineries assume all the risks and costs of storage. [FN6] 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 consumers. [FN7] FN6 In its reply to the question put by the Court following the adjournment of the hearing, concerning the extent to which the marketing companies were structurally dependent on the refineries, the Greek Government stated that the Hellenika Petrelaia SA refinery (which in 1997 stored more than half the reserves) is the only one with two subsidiaries, Eko-Elda Avee and G. Mamidakis, which are wholly owned. It further stated that in any event it is a statutory requirement that marketing companies have separate legal personality from the refineries and that if one of the latter controls or owns shares in one of those undertakings, the transactions between them must comply with the rules on competition. FN7 The Greek system does not appear to be particularly transparent as regards the costs of maintaining emergency stocks. The second sub-paragraph of Article 3(2) of Directive 68/414, as amended by Directive 98/93, provides: "The cost burden resulting from the maintenance of stocks in accordance with Article 1 shall be identified by transparent arrangements. In this context, Member States may adopt measures to obtain appropriate information regarding the cost burden

of stockholding in accordance with Article 1 and to make such information available to interested parties". A26 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. A27 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. [FN8] 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 *1627 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], [FN9] representing a little over 10 per cent 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. FN8 The defendant Government states that it wishes new storage facilities to be established in Greece, provided that they comply with the environmental legislation and they are not within a short distance of one another. It states that in recent years it has granted a marketing undertaking permission to increase its storage capacity considerably (27,000 m3), while other smaller installations have also received permission (3,000-5,000 m3). FN9 It does not state whether tonnes or m3, although I assume it means tonnes. A28 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. A29 Therefore, the Greek system of maintaining safety stocks is capable of hindering intra-Community trade, at least indirectly. A30 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. [FN10] FN10 It is apparent from the defence that the storage capacity available to the marketing companies would allow them to import up to 2,500,000 tonnes per annum, but that they only import 220,000 tonnes. Therefore, in spite of having the possibility of installing their own storage tanks and using the ones they already have, directly importing the products which they market, the undertakings prefer to buy from the national refineries and that it is the latter that store the reserves. A31 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. [FN11] FN11 As regards prices, economic logic suggests that the marketing undertakings will exhaust their storage possibilities wherever, other things being equal, the cost of acquiring Greek products is greater than the cost of imported products plus the cost of storing them. A32 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, *1628 moreover, change with the passage of time. [FN12] and that the principle established in Dassonville [FN13] 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. FN12 Case C-391/92, E.C. Commission v. Greece: [1995] E.C.R. I-1621; [1996] 1 C.M.L.R. 359, para. [17]. FN13 Cited in fn. 5 above.

A33 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 [FN14]; a provision which renders imports more difficult or burdensome than internal transactions [FN15]; 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. [FN16] FN14 Case 229/83, Association des Centres Distributeurs Edouard Leclerc and Others v. "Au Ble Vert" Sarl and Others: [1985] E.C.R. 1; [1985] 2 C.M.L.R. 286, para. [23]. FN15 Case 95/81, E.C. Commission v. Italy: [1982] E.C.R. 2187, para. [25]. FN16 Case 249/81, E.C. Commission v. Ireland: [1982] E.C.R. 4005; [1983] 2 C.M.L.R. 104. A34 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. A35 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. A36 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.

Justification for the restriction on the free movement of goods A37 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, *1629 and provided that they do not constitute a means of arbitrary discrimination or a disguised restriction on intra-Community trade. [FN17] FN17 R. v. Secretary of State for the Home Department; Intervener, Generics (UK) Ltd, Ex parte Evans Medical Ltd and Another: [1995] E.C.R. I-563; [1996] 1

C.M.L.R. 53, para. [35]. A38 The Court of Justice has consistently held that national rules which are contrary to Article 30 of the E.C. Treaty can be justified only if they satisfy one of the grounds of general interest set out in Article 36 [FN18] 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. [FN19] FN18 Leclerc v. "Au Ble Vert" Sarl cited in fn. 14 above, para. [29]. FN19 Principle established in Case 120/78, Rewe v. Bundesmonopolverwaltung für Branntwein: [1979] E.C.R. 649; [1979] 3 C.M.L.R. 494, para. [8]. See, more recently, Case 302/86, E.C. Commission v. Denmark: [1988] E.C.R. 4607, para. [6]. 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 E.C. 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. [FN20] 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. FN20 Case C-128/89, E.C. Commission v. Italy: [1990] E.C.R. I-3239, para. [18], and Case 104/75, Officier Van Justitie v. de Peijper: [1976] E.C.R. 613; [1976] 2 C.M.L.R. 271, paras [16] & [17]. A39 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 interst pursued to be protected exists, the Commission contends that the Greek legislation is disproportionate. A40 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 *1630 freedom would be excessively restricted if they were required to store the minimum stocks, thus assuming the marketing undertakings' obligation, if the latter were not required in return to purchase the products which the refineries sell. Secondly, 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. A41 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 become 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. [FN21] 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 [FN22] and the protection of creativity and cultural diversity in the realm of publishing. [FN23] FN21 Case 46/76, Bauhuis v. Netherlands: [1977] E.C.R. 5, para. [12] and Case 113/80, E.C. Commission v. Ireland: [1981] E.C.R. 1625; [1982] 1 C.M.L.R. 706, para. [7]. FN22 E.C. Commission v. Ireland, cited in fn. 21 above, para. [8]. FN23 Leclerc v. "Au Ble Vert" Sarl, cited in fn. 14 above, para. [30]. A42 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 which is vital for national security and the continuous supply of petroleum products could not therefore be guaranteed. A43 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 *1631 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. A44 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 now 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. A45 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 consumer small quantities of petroleum products. However, those reasons cannot be subsumed into any of the grounds of geneal 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. [FN24] FN24 Case 103/84, E.C. Commission v. Italy: [1986] E.C.R. 1759; [1987] 2 C.M.L.R. 825, para. [22]; Case 238/82, Duphar BV and Others v. Netherlands: [1984] E.C.R. 523; [1985] 1 C.M.L.R. 256, para. [23]; Case 95/81, E.C. Commission v. Italy: [1982] E.C.R. 2187, para. [27], and Case 7/61, Re Quantitative Restrictions on Imports of Pork Products into Italy: E.C. Commission v. Italy: [1961] E.C.R. 317; [1962] C.M.L.R. 39, at [1961] E.C.R. 329. A46 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 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. A47 In Case 72/83, Campus Oil Ltd and Others v. Ministry for Industry and Energy and Others [FN25] 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 *1632 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. [FN26] FN25 [1984] E.C.R. 2727; [1984] 3 C.M.L.R. 544. FN26 That judgment was the first concrete example of the Court of Justice working out the relationship between the exceptions laid down in Article 36 of the Treaty and matters of an economic nature. Mortelmans, K.J.M.: Common Market Law Review, 1984, p. 696 et seq., in particular p. 699. 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. [FN27] FN27 Oliver, P., in Common Market Law Review, 1985, p. 307 et seq., in particular p. 312, considered that that judgment might be regarded as a serious blow to the prospects for creating a common energy policy. A48 To my mind, the arguments which Greece 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. A49 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.

Costs A50 Since the grounds formulated by the Commission must be upheld, Greece must be ordered to pay the costs of the case, in accordance with Article 69(2) of the Rules of Procedure.

Conclusion A51 In the light of the foregoing considerations, I propose that the Court should: Declare that Greece has failed to fulfil its obligations under Article 30 of the E.C. Treaty (now, after amendment, Article 28 E.C.) 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 *1633 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 Greece to pay the costs. JUDGMENT 1 By application lodged at the Court Registry on 6 November 1998, the Commission of the European Communities brought an action under Article 169 of the E.C. Treaty (now Article 226 E.C.) for a declaration that, by establishing and maintaining a system for stocks of petroleum products which directly links the possibility of transferring to the refineries operating in the country the obligation to stock supplies with an obligation to obtain supplies of petroleum products from those refineries, and by precluding service stations from obtaining supplies from refineries or from another Member State, Greece had failed to fulfil its obligations under Article 30 of the E.C. Treaty (now, after amendment, Article 28 E.C.). Background to the dispute 2 Council Directive 68/414 imposing an obligation on Member States of the EEC to maintain minimum stocks of crude oil and/or petroleum products, [FN28] as amended by Council Directive 72/425 [FN29] ("Directive 68/414"), requires Member States to maintain minimum stocks of petroleum products. The level of those stocks must be equivalent to at least 90 days' average daily internal consumption in the preceding calendar year. FN28 [1968] O.J. Spec. Ed. 586. FN29 [1972] O.J. Spec. Ed. 69. 3 Under Article 6 of Directive 68/414, only quantities fully at the disposal of a Member State in the event of difficulty obtaining oil supplies are to be regarded as stocks within the meaning of the directive. Member States may choose to maintain the stocks in their territory. Stocks may also be established in the territory of one Member State on behalf of undertakings established in another, in accordance with individual agreements between governments. Directive 68/414 leaves it to Member States to decide on the undertakings obliged to store those reserves. 4 In Greece, the establishment of minimum stocks of petroleum products is governed by Articles 8(2) and 10 of Law No. 1571/85, as amended by Law No. 2289/95, the Regulation on the control of goods and Article 10 of Presidential Decree No. 1224/81. 5 Under those rules, the minimum stocks of petroleum products are to be kept in Greece and to be stored by the petroleum marketing companies ("marketing

companies") in tanks owned or leased by them outside the refineries. 6 Since 1 January 1996, the marketing companies have been entitled *1634 to transfer their obligation, in whole or in part, to refineries in Greece where they bought products during the previous calendar year. The transfer may be made up to a total quantity equal to the volume of products of each category delivered to the marketing companies during a 90-day period in the previous year by each of the refineries with which they do business. 7 The Greek market in petroleum products is structured on three levels. The first is constituted by the refineries, which sell refined products to the marketing companies. Under Article 8(2) of Law No. 1571/85, refineries operating in Greece are not entitled to sell petroleum products directly, without using the marketing companies, save as provided in Article 6(3) of that Law, dealing with supplies to the armed forces. The second level consists of the marketing companies, which may buy products from the refineries or import them and are responsible for supplying 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 buy them from the marketing companies. Pre-litigation procedure 8 In September 1992, the Commission informed the Greek authorities that certain aspects of the Greek system on the compulsory maintenance of emergency stocks of petroleum products might be contrary to Article 30 of the Treaty. 9 After a lengthy exchange of correspondence and a series of bilateral meetings, the Greek authorities informed the Commission in May 1994 of the work undertaken to amend the legislation on the storage and distribution of petroleum products. In December 1994 they notified the Commission of a draft law designed to amend Article 10 of Law No. 1571/85, as amended by Law No. 1769/88 and Law No. 2008/92. That draft became Law No. 2289/95 at the beginning of 1995. 10 On 19 September 1995, the Commission sent the Greek authorities a letter of formal notice stating that, despite the amendments, the legislation on the storage and distribution of petrol products still appeared to be contrary to Article 30 of the Treaty. The Commission asked the Greek authorities to submit their observations in that regard. 11 The Greek Government answered, in a letter of 1 December 1995, that the Greek system on the compulsory maintenance of emergency stocks of petroleum products 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. 12 Following a bilateral meeting, by letter of 11 July 1996, the Greek authorities sent the Commission a draft amendment of Article 10(3) of Law No. 1571/85, as amended by Law No. 2289/95. 13 *1635 Being unconvinced by the Greek authorites' arguments, the Commission issued a reasoned opinion on 17 June 1997, calling upon Greece to

take the necessary compliance measures within two months. The Greek Government replied to that opinion by maintaining its previous argument. 14 In those circumstances, the Commission decided to bring the present action. Arguments of the parties 15 The Commission argues that the system devised by Greece in order to comply with the storage obligation imposed by Directive 68/414 is contrary to Article 30 of the Treaty because the possibility which the Greek legislation offers the marketing companies of transferring their storage obligation to refineries established in Greece is conditional upon their having made purchases from those refineries during the previous calendar year. 16 The Commission makes no complaint of the fact that the emergency stocks may be stored at refineries, but considers that the obligation to buy petroleum products from refineries established in Greece, which is imposed upon the marketing companies as a condition for their being able to transfer their storage obligation, constitutes an obstacle to the free movement of goods. In practice, that obligation clearly discriminates in favour of national products to the detriment of foreign ones. The importation of petroleum products, while not being prohibited, is strongly discouraged, since, if the marketing companies were to obtain their supplies in other Member States, they would lose the possibility of transferring their storage obligation to the refineries. 17 The Commission adds that the discrimination against imports of petroleum products is intensified by the fact that the petrol stations are obliged to take their supplies through the intermediary of the marketing companies. 18 It submits that the legislation in question cannot be justified under Article 36 of the E.C. Treaty (now, after amendment, Article 30 E.C.) because the aim pursued by the Greek authorities, namely the ensuring of continuity in the supply of petroleum products, could be achieved by less restrictive measures. 19 The Greek Government argues that the system in question does not create any discrimination against imports of petroleum products, and that it affects the marketing of national products and imported products in the same way. 20 It contends that the marketing companies obtain their supplies from refineries established in Greece not because of the legislation with which the Commission finds fault but because of market conditions. First, the refineries are connected by pipeline to most of the large installations of the marketing companies, so that direct supplies can be provided at a low cost. Secondly, the refineries are situated close to *1636 large centres of consumption, where the marketing companies operate. Finally, the refineries are able to supply, on time and in small quantities, the amounts required by the marketing companies' low-capacity regional installations scattered around Greece. 21 Even if the system in question does constitute an obstacle to the free movement of goods, the Greek Government argues that that obstacle is justified by a public interest objective, namely security of supply of petroleum products, which benefits from the derogation provided by Article 36 of the Treaty. The Government argues that that objective cannot be acheived by less restrictive

measures. The refineries' fundamental right to economic freedom would be excessively restricted if they were required to store the minimum stocks of petroleum products, and thus assume an obligation of the marketing companies, if the latter were not required in return to purchase their supplies from those refineries. Findings of the Court 22 Article 30 of the Treaty is designed to prohibit all trading rules enacted by Member States which are capable, directly or indirectly, actually or potentially, of hindering intra-Community trade. [FN30] FN30 See Case 8/74, Procureur du Roi v. Dassonville: [1974] E.C.R. 837; [1974] 2 C.M.L.R. 436, para. [5]. 23 It is undisputed that the possibility which the legislation in question offers to the marketing companies of transferring their obligation to store petroleum products to the refineries gives rise to advantages for those companies. 24 However, the Greek system on the compulsory maintenance of emergency stocks of petroleum products means that marketing companies wishing to transfer their storage obligation are obliged to obtain a significant part of their supplies from refineries established in Greece. 25 More precisely, a marketing company may transfer the obligation to store petroleum products to a refinery in Greece only in respect of the volume of products which that refinery supplied to the company over a 90 day period during the preceding calendar year. A marketing company must therefore buy a large quantity of petroleum products each year from a refinery established in Greece in order to be entitled, the following year, to transfer its storage obligation to that refinery. 26 It follows that making the transfer of the storage obligation conditional upon the purchase of petroleum products from refineries established in Greece constitutes discrimination against petroleum products from refineries situated in other Member States, in that it makes their marketing more difficult. Although marketing companies may free themselves from the obligation to store petroleum products at their installations if they obtain supplies from refineries established *1637 in Greece, they cannot do so if they buy their petroleum products from refineries situated in other Member States. 27 It must therefore be held that the Greek system on the compulsory maintenance of emergency 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. 28 As for the question whether the system in question may nevertheless be justified, as the Greek Government claims, under Article 36 of the Treaty, it should be recalled that, according to the case law of the Court of Justice, national rules adopted in order to achieve one of the objectives referred to in that provision are compatible with the 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. [FN31] FN31 See Case C-128/89, E.C. Commission v. Italy: [1990] E.C.R. I-3239; [1991] 3 C.M.L.R. 720, para. [18]. 29 The Greek Government cites the objective of maintaining a stock of petroleum products on Greek territory for reasons of public security. It is true that the maintenance on national territory of a stock of petroleum products allowing continuity of supplies to be guaranteed constitutes a public security objective within the meaning of Article 36 of the Treaty. [FN32] FN32 See Case 72/83, Campus Oil Ltd and Others v. Minister for Industry and Energy and Others: [1984] E.C.R. 2727; [1984] 3 C.M.L.R. 544, para. [35]. 30 However, the arguments of the Greek Government referred to in paragraph 21 of this judgment are purely economic arguments which can never serve as justification for a quantitative restriction within the meaning of Article 30 of the Treaty. [FN33] FN33 See, to that effect, Campus Oil, para. [35]. 31 In any event, having regard in particular to the arguments set out by the Advocate General in paragraphs A43, A44 and A46 to A48 of his Opinion, the objective of public security could have been achieved by less restrictive measures without it being necessary to make the transfer of the storage obligation to refineries established in Greece conditional upon the obligation to obtain supplies of petroleum products from those refineries. 32 In those circumstances, it must be held that, by establishing and maintaining a system for the compulsory maintenance of emergency stocks of petroleum products which directly links the facility for marketing companies to transfer their storage obligation to refineries established in Greece to an obligation to obtain their supplies of those products from those refineries, Greece has failed to fulfil its obligations under Article 30 of the Treaty. Costs 33 Under Article 69(2) of the Rules of Procedure, the unsuccessful party is to be ordered to pay the costs if they have been applied for in the successful party's pleadings. Since the Commission has applied for *1638 costs and Greece has been unsuccessful, the latter must be ordered to pay the costs. R1 Order On those grounds, THE COURT (Fifth CHAMBER) HEREBY:

1. By establishing and maintaining a system for the compulsory maintenance of emergency stocks of petroleum products which directly links the facility for companies which market those products to transfer their storage obligation to refineries established in Greece to an obligation to obtain their supplies of those products from those refineries, Greece has failed to fulfil its obligations under Article 30 of the E.C. Treaty (now, after amendment, Article 28 E.C.). 2. Greece is ordered to pay the costs.

(c) Sweet & Maxwell Limited [2001] 3 C.M.L.R. 62 END OF DOCUMENT