Costa v. Ente Nazionale per l'Energia Elettrica (Enel)

(Case 14/1964)

and before the Court of Justice of the European Communities (Case 6/64)

ECJ

(The President, Judge A. M. Donner; Judges L. Delvaux,

Ch. L. Hammes, A. Trabucchi, R. Rossi, R. Lecourt and W. Strauss). M.

Maurice Lagrange, Advocate General .

15 July 1964

Before the Italian Constitutional Court (CORTE Costituzionale)

(The President, Judge G. Ambrosini; Judges G. Castello Avolio, A. Papaldo, N.

Jaeger, G. Cassandro, B. Petrocelli, A. Manca, A. Sandulli, G. Branca, M. Fragali, C. Mortati, G. Chiarelli, G. VerzI, G. B. Benedetti and F. P.

Bonifacio).

24 February 1964 [FN1] Reference from the Giudice Conciliatore, Milan, [FN2]. For Preliminary Rulings.

Conflict of laws. In spite of Article 11 of the Italian Constitution, an international treaty can only be brought into effect in Italian municipal law by means of an ordinary Law. Such an enacting Law is no different in effect from any other Law and is subject to the normal rules with regard to implied repeal when it conflicts with other Laws. The violation of a treaty provision, although it may involve State responsibility on an international level, does not invalidate a domestic Law (per Corte Costituzionale). FN1 Reported in Italian in (1964) 87 I Foro Italiano 465. The judgment, which was delivered on 24 February, was not actually deposited in the Court registry until 7 March 1964. Its date may therefore occasionally be given as 24 February/7 March 1964 or simply as 7 March 1964.

FN2 See (1963) 86 I Foro Italiano 2368 The E.E.C. Treatycreated its own legal order which is directly applicable both to the member-States and to their nationals as a result of the partial transfer of sovereignty from the member-States to the Community. Consequently, a subsequent unilateral Law which is incompatible with the aims of the Community cannot prevail (per European Court*426 ). Procedure. Individual right of action. The duties imposed on member-States by Articles 102 and 93 of the E.E.C. Treaty , being positive and requiring State or Community action, are not subject to enforcement or pleading by individuals before national courts (per European Court). The prohibitions imposed on member-States by Articles 53 and 37 of the E.E.C. Treaty, being negative, complete in themselves and requiring the intervention of no act by either State or Community organ, are legally perfect and consequently capable of producing immediate effect as between the State and its nationals; the latter are, therefore, entitled to plead breach of the prohibitions in proceedings before national courts (per European Court). Right of establishment. The right of establishment referred to in Articles 52 and 53 of the E.E.C. Treatyis a right to 'national treatment' only and does not confer an absolute right to engage in any occupation (per European Court). State trading monopolies. A State trading monopoly is only affected by Article 37 of the E.E.C. Treaty if it (a) has as its object transactions in commercial products capable of competition and exchange between member-States, and (b) plays a leading part in such exchanges (per European Court). The Italian Constitutional Court refused a request by Avv. Flaminio Costa to declare the E.E.C. Treaty applicable to the Law of 6 December 1962 nationalising the Italian electricity industry. The European Court, on the other hand, on reference under Article 177 from the Giudice Conciliatore, Milan, declared that the Treaty was directly applicable within a member-State and that Articles 37 and 53 created rights which were directly enforceable by individuals before national courts. Representation Avv. Flaminio Costa and Avv. Gian Galeazzo Standardi appeared for the plaintiff before both courts; Avv. Antonio Sorrentino,Avv. Aldo Dedin and Avv. Enrico

Pizzi appeared for the Soc. Edisonvolta before the Constitutional Court; ENEL was represented by Avv. Leopoldo Piccardi,Avv. Luigi Galateria,Avv. Massimo Severo Giannini and Avv. Francesco Santoro Passarellibefore the Constitutional Court, and by Avv. Federico Settiand Avv. Franco Calasella before the European Court; the Deputy Advocate General Luciano Tracanna appeared for the President of the Council of Ministers before the Constitutional Court. Facts Under Law No. 1643 of 6 December 1962 and subsequent decrees, the Italian Republic nationalised the production and*427 distribution of electric energy and created an organisation, the Ente Nazionale per l'Energia Elettrica (or ENEL), to which was transferred the property of the electricity undertakings. Sig. Flaminio Costa, an advocate in Milan and a shareholder of Edisonvolta, a firm which had been affected by the nationalisation, claimed that he was not liable for a bill amounting to 1,925 lire (roughly 22s.) sent to him for electricity supplied to him by ENEL. In proceedings before the Giudice Conciliatore (Justice of the Peace) of Milan, who had jurisdiction in first and last resort because of the amount of the debt, Avv. Costa claimed that the Nationalisation Law of 6 December 1962 was contrary to the Italian Constitution and also contrary to a number of provisions of the E.E.C. Treaty. In particular, he alleged: (a) that he was not obliged to make the payment to ENEL since that body had not complied with the provisions of Article 1406 of the Civil Code [FN3]; (b) that as an Italian national, and in addition as a shareholder of Edisonvolta, he had an interest in the payment for the supply of electricity being made to the latter company; (c) that he did not mean to pay the sum to ENEL because the Law that created it, and the connected regulations issued under delegated authority relating to the transfer of other electricity companies to it, was constitutionally unlawful. FN3 Codice Civile (c.c.) He thereupon successfully requested the judge to refer the case, for preliminary opinions, to both the Italian Constitutional Court [FN4] and, under Article 177 of the E.E.C. Treaty, to the European Court. FN4 Corte Costituzionale. Reference to the Corte Costituzionale By order of 10 September 1963, the Milan judge, after remarking that Edisonvolta had not entered an appearance and that the only questions of constitutional importance liable to affect the proceedings before him were those regarding the lawful incorporation of ENEL, put five questions to the Constitutional Court. These related to five different grounds for alleging the constitutional invalidity of the Law of 6 December 1962 as violating:

(1) Article 67 of the Constitution, since it was passed by Members of Parliament who had stated that they were voting in favour merely in compliance with directives from their political party; (2) Article 43 of the Constitution, in that it lacked the prerequisite of public benefit which alone might justify an expropriation law: such reasons did not appear in the text of the law and were excluded from the observations*428 made at the committee stage of the Bill. This was confirmed by the fact that the number of companies that escaped nationalisation was greater than that of those being nationalised; (3) Articles 4 and 41 of the Constitution, in that Article 1 of the Law in question precludes for the future to everyone the choice of such an activity as supplying electricity; (4) Article 3 of the Constitution, in that Articles 1 and 4 (a) of the Law create an arbitrary and unreasonable disparity in treatment, because they exempt from their ambit the companies which do not reach a production of 50 million kWh of electricity; (5) Article 11 [FN5] of the Constitution, in that the whole of the Law conflicts with the following provisions of the E.E.C. Treaty: Article 102, [FN6] inasmuch as the Law, before being passed, should have been submitted for examination by the E.E.C. Commission; Article 93 (3), [FN7] inasmuch as the Law considers as lawful the aids which the Treaty forbids, and in particular because in Article 4 (11) it envisages a more favourable treatment for the Acciaierie di Terni; Article 53, [FN8] inasmuch as that Article prevents the introduction of new restrictions on the principle of freedom of*429 establishment; and Article 37 (2), [FN9] inasmuch as the Law created a national monopoly. FN5 Article 11 provides: Italy repudiates war as an instrument of injury to the liberty of other peoples and as a means of resolving international disputes; consents, on condition of reciprocity with the other States, to limitations of sovereignty necessary for an arrangement which may ensure peace and justice between the Nations and favours the international organisations directed to such an aim. FN6 Article 102 (1) provides: Where there is reason to fear that the introduction or amendment of a legislative or administrative provision may cause distortion within the meaning of the preceding Article, the member-State desiring to proceed therewith shall consult the Commission. After consulting the member-States the Commission shall recommend to the States concerned such measures as may be appropriate to avoid the distortion in question. FN7 Article 93 (3) provides: The Commission shall be informed, in sufficient time to enable it to submit its comments, of any plans to grant or modify grants of aid. If it considers that any such plan is incompatible with the Common Market within the meaning of Article 92 it shall without delay initiate the procedure provided for in the preceding paragraph. The member-State concerned shall not put its proposed measures into effect until this procedure has resulted in a final

decision. FN8 Article 53provides: Member-States shall not introduce any new restrictions on the right of establishment, in their territories, of nationals of other member-States, save where this Treaty otherwise provides. FN9 Article 37 (2) provides: Member-States shall abstain from introducing any new measure which is contrary to the principles laid down in paragraph (1) of this Article or which restricts the scope of Articles dealing with the abolition of customs duties and quantitative restrictions between member-States. The order of the Milan judge was notified to the parties, to the President of the Council of Ministers and to the President of both Chambers of Parliament on various dates between 23rd September and 3rd October and was published in the Official Gazette of the Republic on 2 November 1963. Reference to the European Court By order of 16 January 1964, the Milan judge decided as follows: 'In view of Article 177 of the Treaty of 25 March 1957 instituting the E.E.C., incorporated in Italian law by Law No. 1203 of 14 October 1957, and in view of the allegation that Law No. 1643 of 6 December 1962 and the presidential decrees issued in execution of this Law (No. 1679 of 15 December 1962 , No. 36 of 4 February 1963, No. 138 of 25 February 1963 and No. 219 of 14 March 1963) violate Articles 102, 93, 53 and 37 of the aforementioned Treaty, the proceedings are suspended and a certified copy of the file is ordered to be transmitted to the Court of Justice of the E.E.C. at Luxembourg.' The Registrar of the Giudice Conciliatore seised the Court of Justice with the preliminary questions, which were entered in the registry of the Court on 20 February 1964. In his memorandum filed on 15 May 1964, Avv. Costa set out his observations and requested of the Court 'the interpretation of the Treaty, especially Articles 102, 93, 53 and 37'; in its memorandum filed on 23 May 1964, the Italian Government alleged the 'absolute inadmissibility' of the preliminary question and the lack of foundation of the request for interpretation; in its memorandum, filed on 23 May 1964, ENEL alleged the lack of foundation of these questions; in its memorandum filed on 23 May 1964, the E.E.C. Commission made known its observations both on the relevance of the questions put and on the interpretation of the Articles mentioned therein. The Court also received a request to intervene, filed in the registry on 20 May 1964, which was declared inadmissible by order of 3 June 1964.

*430 JUDGMENT OF THE CORTE COSTITUZIONALE 1. A preliminary point that was raised is that the Milan judge failed to consider that the plaintiff, by instituting proceedings that should not have taken place, had given rise to a primarily constitutional matter. It was further alleged that the order

of the judge refers in general terms to the Law of 6 December 1962 whereas it should have shown the individual articles that were alleged to violate the Constitution. These observations are unfounded. Whilst it is true to say that a judgment upon the constitutional legality of a Law could not be instituted autonomously, the Milan judge found that the illegality of the Law creating ENEL, consequent upon it being contrary to the Constitution, precluded ENEL from asserting its position as true and lawful creditor of the plaintiff. For this reason the judge, to be enabled to come to a conclusion on the facts, found it necessary to refer the matter of the constitutional legality of the Law, asserting that the problem had to be posed as regards the reasons that militate against the lawful incorporation of ENEL and not as regards other reasons that are unconnected with such incorporation. His line of reasoning was criticised substantially when it was said that the plaintiff had a right to ascertain that his payment was being made to the true creditor so that he might be released from his obligation. On this, however, it may be observed that, even assuming it were true--whether by virtue of the nature of the credit (and certainly not by virtue of its amount) or for any other reason--that the payment made to ENEL could have released the plaintiff, this was a matter more properly to be dealt with in the judgment on the merits and as such is unassailable in this court provided that judgment was given and was properly reasoned: and in the case in instance there can be no doubt on that point. It is also true that this court has the power to refuse to entertain preliminary questions when prima facie it should find that such preliminary questions have no relevance at all to the proceedings on the merits; but we do not think this has happened. As regards the failure to enumerate the articles of the Law that is being attacked--which are alleged to be unlawful--suffice it to say that all the reasons adduced, except one, refer to the Law in its totality and not to its provisions individually. Other preliminary submissions are those of the plaintiff when he calls for the transmission of the file to the European Court of Justice in order to obtain a judgment upon the interpretation of the Treaty creating the E.E.C., and of Messrs. Edisonvolta who call for the remission of the case to the Milan judge so that he himself may refer the matter to the European Court of Justice. *431 It is impossible to decide upon these submissions without having first considered the matter of the alleged conflict with Article 11 of the Constitution. We accordingly defer consideration of such matters until such time as we have thoroughly investigated such conflict. 2. The defences raised by the parties have gone much further than the problems raised by the order that remitted the case to this Court. Following our own consistent precedents in this matter, we must make clear that we shall deal with the problems as they arise from the order of the Milan judge without any amplification whatsoever that might bring the matter outside the boundaries to which it must be confined. The first question refers to the violation of Article 67 of the Constitution. According to the order, this violation results from the fact that the Law of 1962 was approved by Members of Parliament who had stated they were voting in

favour merely in pursuance of directives from their own political party. It must be borne in mind, however--and this point has been very clearly made by the plaintiff--that the question was not based upon the will of parliamentarians. In fact, the order does not state that the deliberations of both Chambers of Parliament were invalid because those who voted for them did not exercise their free will, but merely because voting was influenced by the directive of the parties, thus running counter to the constitutional rule of the freedom of those who are elected to parliament and of the prohibition of mandates. This Court confines itself to the remark that the fact that the order correctly identifies the problem proves that the allegations are unfounded. Article 67 of the Constitution--which, it must be remembered, is placed among the rules that govern the constitution of the Chambers of Parliament and not amongst those that regulate the passing of laws--has no effect as regards the validity of voting; its only aim is to ensure freedom to Members of Parliament. The prohibition of a mandate means that a Member of Parliament is free to vote in accordance with the directives of his party but is equally free not to do so; no rule of law could lawfully prescribe that a Member of Parliament should be penalised because he had voted against the directives of his party. It is quite clear from this that any discussion upon the relation-ships between parliamentarians and their own parties, such as has taken place in these proceedings, is entirely irrelevant. We must state that in this case there was no violation of Article 67. 3. What we have said with regard to the need to deal precisely with the order is particularly relevant in connection with Article 43 of the Constitution. *432 As regards the bases of legality for a proper representation of Article 43 the parties to these proceedings have investigated and discussed in various manners the following points: whether the electricity undertakings which were nationalised provided essential public services or sources of energy or situations of monopoly; whether they were substantially bodies of public interest; whether the reservation and the relative transfer should have taken place by special law; whether the compensation paid corresponds to the measure prescribed by the Constitution. But all these matters are outside the ambit of the order before us, which submits a single problem: that of the existence of aims of public well-being. On this point alone it is for this Court to consider. The order states that such aims of public utility do not exist: they are not mentioned in the Law, they are excluded from the content of the report on the committee stage of the Bill and are indeed contradicted in the body of the Law itself, for the mere reason that there are exempted from nationalisation a number of firms much greater than those that are nationalised. Before deciding upon these observations and those that have been put forward in connection with this matter, we feel bound to point out that it has been unanimously agreed that it is for this Court to investigate the existence of aims of public well-being. For that reason we pass no further comment on the point, also because this is affirmed in two previous judgments of this Court. [FN10] FN10 CORTE Costituzionale, 23 March 1960 (Delivered 15 March 1960), Villari

(11/1960): (1960) 83 I Foro It. 545, (1960) 112 Giurisprudenza It. 490; Corte Costituzionale , 13 July 1960 (Delivered 6 July 1960), Soc. Tempot.V. v. Minister of Posts and Telecommunications (59/1960): (1960) 83 I Foro It. 1065, (1960) 112 Giurisprudenza It. 1297. In order to decide that the Law under consideration does not correspond to aims of public utility and well-being in accordance with Article 43 of the Constitution, it should be proved: that the legislature failed to appreciate such aims and the means necessary to attain them or that any appreciation made was vitiated by illogical, arbitrary or contradictory criteria; or even, that such appreciation appears to be in conflict with reality. The same could be said if one could prove that the Law laid down means which were unsuitable or contrasting with the aims that inspired it, or if it should appear that the legislature had made use of the Law for purposes other than those of public well-being which the Constitution prescribes. It must firstly be pointed out, however, that it is not true to say that the legislature failed to make such an appreciation: it is enough to recall the vivid discussions in Parliament to reject the submission that this Law did not receive proper consideration or have its pros and cons properly debated. *433 The order might have required that the Law should contain some reasoning with respect to public well-being. As a rule, however, it is not necessary that a Law should state its reasons since the Law itself, by virtue of the system that it creates, of its contents, and of the nature of its precepts, carries within itself its own justification and the reasons of its appearance in the world of law. In the case in instance, furthermore, the Law of 1962 states quite clearly the aims and the intentions that inspired it and the means that would be used to attain them. Article 1 states that in connection with aims of public utility ENEL will co-ordinate the utilisation of electricity and improve plants in order to ensure, at the minimum running cost, an availability of electricity adequate, in quantity and in price, to the requirement of a well-balanced economic development of the country. The other provisions of the Law, as well as those adopted by subsequent statutory instruments, have borne in mind these requirements of development, co-ordination and equilibrium. It is likewise not true to say that a certain contradiction may be inferred from the fact that the Law has excluded from nationalisation a number of undertakings greater than that actually nationalised. This might have been a valid argument if it could have been proved that this exclusion caused it to be impossible to attain aims of public utility. But this does not appear from the facts before us. Nor can it be argued that, by refraining from nationalising all the undertakings, the Law has contradicted itself inasmuch as this nationalisation could just as effectively have taken place through the takeover of the more important companies, leaving within a general framework the smaller companies and those having special structure or object. It cannot, therefore, be said that this criterion--which cannot be attacked as unlawful--contradicts the objects of the Law. This Court has examined the data and the critical observations made by Costa and Edisonvolta in their defences, and the suggestion that one should ascertain

the efficiency of electrical undertakings prior to their being nationalised and investigate the possibility of a more or less radical review of the whole industry, the means to be adopted for such a review, and the results that one might expect. This investigation has revealed no obvious conflict between the decisions of the legislature, the facts and the requirements, nor has it thrown any light on whether the criteria inspiring this Law were illogical or arbitrary. The truth is that the legislature has made a choice of aims and means regarding which an investigation as to legality must stop within the boundaries beyond which it would become an inadmissible interference within that sphere of political discretion which belongs to the legislature. Such would be the suggestion that one*434 should ascertain whether it might not have been preferable to convert these companies into a group like I.R.I., or whether any other form of co-ordination might have been preferable, or whether ENEL should be organised in this or in that manner or whether the charges were more likely to be uniform before or after nationalisation or whether the requirements of the public are protected more adequately before or after such a Law, and so on. What the Law has tried to do is to obtain a better satisfaction of the interests of the community in a field of industry having particular economic significance. In this satisfaction of the interest of the community lies the public utility of the undertaking. And if such utility must correspond to the well-being of the community--considered not as the sum total of individuals and groups but as a whole, as a complex--the fact that the Law has dictated the sacrifice of individual interests does not in itself mean the public utility has failed. A proper identification of the interests to be satisfied, of the means to be adopted and of the sacrifices to be made in connection with public well-being, is the task of Parliament; and it is to Parliament that the task of deciding, in the various stages of the life of the community, what are the requirements and the means within the framework and the limitation of our Constitution has been entrusted. Like any other activity that takes place within Parliament, Laws do not lack a political motivation; and it is quite natural that a Law like the one we are considering should be even more noticeably inspired by political impulses. But this does not mean that such impulses have overcome and carried away those aims of public utility which Parliament, by undertaking to be responsible before the country, has endeavoured to reach by approving the Law. 4. As regards the alleged violation of Article 4 in connection with Article 41 of the Constitution, suffice it to say that if the Law that made certain reservations with respect to a particular field of industry is valid, the obvious consequence is that, in that particular field, freedom of choice is legally limited, just as there was imposed a limit to freedom of economic initiative in that same field. 5. As regards the violation of Article 3 of the Constitution, one can but point out the undeniable differences between the firms that are being nationalised and those that are exempted: differences of size, capital, number of employees, number of consumers. It is because of such differences that their exclusion from nationalisation does not seem illogical. A further violation of Article 3 is alleged by the plaintiff in so far as there is an unjustified difference in treatment, as regards the payment of compensation,

between certain classes of undertakings*435 and others. But this is not a point that need trouble us, since it is not mentioned in the order. The last question relates to the alleged conflict between the Law creating ENEL and Article 11 of the Constitution. Article 11 is here prayed in aid in so far as it states that Italy agrees, under conditions of parity with other States, to such limitations of sovereignty as are necessary for the establishment of an order that will ensure peace and justice amongst nations; and it will promote and favour international organisations for this purpose. This means that, given certain circumstances, it is possible to stipulate treaties as a result of which we accept certain limitations to our sovereignty and it is quite lawful to give effect to such treaties by means of an ordinary Law; but this does not result in any deviation from the existing rule relating to the efficacy, within national law, of the obligations undertaken by the State in connection with its relations with other States, since Article 11 did not confer a greater effect upon the ordinary Law that gives effect to a treaty. Nor can we agree with the view according to which any Law containing provisions differing from those of international treaties is unlawful, inasmuch as it is in conflict with Article 11 in so far as it is in conflict with the Law giving effect to the Treaty. The phenomenon of a conflict of a constitutional provision resulting from the violation of an ordinary Law is not unusual. Quite often this Court has declared unlawful certain provisions of legislative decrees that did not correspond with the Law that granted delegated powers to issue them, relating the cause of illegality to a violation of Article 76 of the Constitution. But the situation is quite different as regards that part of Article 11 containing the provision which is being considered in this case. Article 76 lays down certain rules regarding the exercise of a delegated legislative function and for this reason non-compliance with the principles of the delegating Law results in violation of Article 76. Article 11, on the other hand, inasmuch as it is considered as a permissive provision, ascribes no particular significance to a Law giving execution to an international treaty as opposed to any other Law. Nor is there any validity in the other argument, according to which the State, once it has agreed to limitations to its own sovereignty, could not pass any Law withdrawing such limitations and restoring its freedom of action without contradicting the Constitution. Against this can be set our foregoing remarks, from which we are led to believe that the violation of a treaty, even if it results in responsibility by the State at international level, does not detract from the validity of any conflicting Law. *436 There is no doubt that the State is bound to honour its obligations, just as there is no doubt that an international treaty is fully effective in so far as a Law has given execution to it. But with regard to such Law, there must remain inviolate the prevalence of subsequent laws in accordance with the principles governing the succession of laws in time; it follows that any conflict between the one and the other cannot give rise to any constitutional matter. From the foregoing we reach the conclusion that for present purposes there is no point in dealing with the character of the E.E.C. and with the consequences that

derive from the Law giving effect to the Treaty creating the E.E.C.; nor is it necessary to question whether the Law that is being attacked before us has violated the obligations undertaken by virtue of the Treaty aforesaid. It follows from this that the question regarding the remission of the file to the Court of Justice of the European Community, and the relevant question of jurisdiction, do not even arise. For all these reasons this Court declares that any question upon the constitutional legality of the Law of 6 December 1962 No. 1643 (creating ENEL), raised by the order before it in connection with Article 3, Article 4, Article 41, Article 43 and Article 67 of the Constitution, is unfounded.

Submissions of the Advocate General (M. Maurice Lagrange) before the European

Court The preliminary question upon which you have to give an opinion under Article 177 of the E.E.C. Treaty does not, for once, come from a Dutch court, but from an Italian judge; and it is no longer a question of social security or of Regulation 3but rather of a certain number of provisions of the Treaty itself in respect of which your authoritative interpretation is demanded in circumstances that are such as to bring in issue the constitutional relationships within the European Economic Community and its member-States. This highlights the importance of the judgment which you will pronounce in this matter. The facts are known to you: M. F. Costa, a lawyer practising in Milan, claims that he is not under an obligation to pay the amount of an invoice (1,925 Italian lire) which was demanded from him in respect of the supply of electricity by the ENTE NAZIONALE PER L'ENERGIA ELETTRICA (ENEL). He objected to this payment before a Justice of the Peace (who was competent in first and last resort by virtue of the amount involved) claiming that the Law of 6 December 1962 nationalising the electrical industry in Italy was contrary to a certain number of Articles of the E.E.C.*437 Treaty, and was unconstitutional. In this connection he demanded--and obtained--a preliminary reference of the whole matter on the one hand to the Italian Constitutional Court and on the other hand to this Court in pursuance of Article 177 of the Treaty.

(1) Preliminary questions Two preliminary questions in connection with the jurisdiction of our Court must be resolved. (a) The first amounts to knowing whether the Milan judge has really seised you with questions relating to the interpretation of the Treaty. In effect, the judgment in question restricted itself to 'the allegation that the Law of 6 December 1962 and the presidential decrees issued in pursuance of such Law violate Articles 102, 93, 53 and 37 of the Treaty' and, as a consequence, went on to order the 'transmission of a certified copy of the file to the Court of Justice of the European Economic Community in Luxembourg'. Furthermore, in its reasoning, the judgment shows in a summary but

nevertheless precise manner, how the Law nationalising the electrical industry in Italy might constitute a violation of each of the Articles of the E.E.C. Treaty and their incompatibility with the Treaty. We submit that this Court can and must make a necessary effort to separate the difficulties relating to the application of the four Articles mentioned above from those that relate to the interpretation of the same. You have already taken this attitude in other cases decided before you with a view to allowing a national judge to give a decision within the limits of his competence--and always within the sphere of your own jurisdiction; and this, after all, is normal practice in view of the fact that the abstract interpretation of the text of the Treaty or of connected regulations of the European Community always takes place in connection with concrete cases that are the subject of litigation. What must be avoided--and this is a danger which begins to be noticed as cases under Article 177 multiply--is that this Court, under the guise of interpretation, more or less substitutes itself for the national judge who, let us not forget, retains jurisdiction to apply the Treaty and the regulations of the Community which internal legislation has incorporated by ratification: finding a clearcut division between application and interpretation is indeed one of the most delicate problems posed by Article 177, all the more so because this dividing line corresponds to that between Community and national jurisdiction and no judge has been entrusted with the duty of resolving such conflict. It must therefore be apparent that a conflict between this Court of Justice and the highest national court could be of such nature as seriously to prejudice the system of international control instituted by the Treaty which rests upon*438 a necessary, and at the same time organic, co-operation between the two orders of jurisdiction. (b) This brings us to an examination of the second preliminary question because it is precisely with difficulties of a constitutional order that we now wish to deal. In its submissions, the Italian Government concluded that the matter referred to you by the Milan judge could not be entertained because, it was said, the question, despite Article 177, was not the premise of a juridical syllogism which the judge should normally formulate to decide upon matters in issue before him. In the proceedings in question, the judge can but apply an internal law of the Italian State and just as there could be no question of an application of it, so there could be no question of an interpretation of the E.E.C. Treaty. In fact the Italian Government expresses the position as follows: 'In this case, the judge had no rule of the E.E.C. Treaty to apply and could not therefore have in respect of such Treaty any of the doubts that Article 177 of the Treaty itself clearly envisages; he could but apply internal law (in casu the Law on ENEL) which regulated the question before him.' The Italian Government went on to say that, furthermore, an examination of a possible violation by a member-State through its internal laws of its Community obligations can only take place in accordance with the procedure laid down in Articles 169 and 170 of the Treaty which procedure is applied not in respect of individual cases but indirectly: '... the laws remain valid even after the judgment of the European Court until such time as the State in pursuance of the general obligations undertaken under Article 5 itself takes the necessary measures to

comply with such judgment'. Members of the Court, upon this point of 'absolute incompetence' it is sufficient to oppose the constant practice of this Court to the effect that the Court of Justice of the European Economic Community does not adjudicate upon the considerations that cause the national judge to think that the Court itself should be called upon to decide a preliminary question: suffice it to remark that this is indeed a matter relative to Article 177, i.e., a matter pertaining to the interpretation of the Treaty or the validity of a Community regulation by virtue of which Article 177 itself gives this Court its jurisdiction. One may nevertheless inquire whether such practice, which is in itself wise and based upon the respect which the Court intends to bear vis-a-vis the competence of national judges, should be applied without any reservation or limitation, for instance even in cases where a preliminary question is manifestly without any relation to the principal question: should the Court in such cases consider itself bound to give an abstract interpretation of the Treaty which,*439 in the circumstances, would appear as a doctrinal stand without any reference to the solution of a problem, when such interpretation might have a bearing upon questions of importance or such as to create serious conflicts with national jurisdictions? One may be allowed to have some doubts in this connection. It is for this reason and with a view both to eliminating any possible misunderstanding and to avoiding such a conflict that we feel that we should deal as clearly as possible with the objections of the Italian Government. We must firstly deal with the second objection, that is to say, with the allegation that a violation of the Treaty as a result of an internal Law subsequent and contrary to the Treaty itself can be dealt with only in the course of the proceedings relating to the failure of member-States envisaged in Articles 169, 170 and 171, a procedure which is not open to individuals and which leaves unaffected such contrast in law until such time as it is repealed in pursuance of the judgment of the Court that declares its incompatibility with the Treaty itself. We submit that that is not the problem: the real problem is that of the co-existence of two rules of law which (we shall assume) are incompatible but nevertheless both applicable within the internal order, the one derived from the Treaty or the institutions of the Community, the other from national laws: which one should prevail until such time as the conflict is resolved? This is the real problem. Without recourse to legal theory upon the nature of the European Community (which is too open to controversy) and without siding either with 'Federal Europe' and 'the Europe of Countries' or with the 'supranational' and ' international', a judge (and indeed such is his function) can only consider the Treaty as it is. But--and it is indeed a simple observation--the Treaty giving effect to the European Economic Community, as well as the other two so-called European Treaties, creates its own legal order which is separate from that of each of the member-States but which substitutes itself partially for those in accordance with rules precisely laid down in the Treaty itself and which consist in a transfer of jurisdiction to Community institutions. To remain in the same field, it is universally conceded that the E.E.C. Treaty,

although a lesser measure than the E.C.S.C. Treaty, contains a certain number of rules which, both by virtue of their nature and by virtue of their object, are directly applicable within national jurisdictions where they have been 'received' as a result of ratification (a phenomenon which after all is not typical only of the European Treaties). You yourselves have admitted the 'self-executing' (using a sacred expression) character of Articles 12 and 31 when you stated that the effect of such articles was to produce immediate effect creating individual rights which national courts must safeguard. As regards those regulations which do not have*440 such an immediate effect, they enter the national order in two different ways according to whether the executive organs of the Community (Council or Commission or more usually the two bodies associated with the intervention of the European Parliament) have or have not the power to issue regulations. Where this does not apply, it is a matter of an obligation by the member-State to accomplish the same result spontaneously in pursuance either of recommendations or of directives from the executive and the Treaty only becomes part of the national order pursuant upon national measures adopted by the competent organs of the State in question. Where, on the other hand, the executive organs of the Community have the power to issue regulations, and make use of it, the incorporation in the national order takes place by right the moment the regulations are published: and in our submission this is apparent from the combination of Articles 189 (2) and 191. Article 189 (2) states that ' regulations have general application. They shall be binding in every respect and directly applicable in each member-State'. According to Article 191, ' regulations shall be published in the Official Journal of the Community. They come into effect on the date shown or, failing this, upon the 20th day following their publication'. It follows therefore that two classes of regulation are directly applicable. (1) The regulations of the Treaty that are considered as 'self-executing'. (2) Those that have been the subject of regulations that will come into force. How can one, therefore, assume that a regulation of the Treaty which has been brought into effect by a special Law does not become incorporated in the national order at the same time as the regulation which it is supposed to support? How can one also assume that another regulation which has not been the subject of a special Law or of a national Law applying it merely because it is self sufficient,should not have the same effect? It follows that it is impossible to deal with a problem resulting from the co-existence within the sphere of each member-State of two separate orders, the national order and the Community order--which each operates within its own sphere--without dealing at the same time with the resulting question of knowing which is the sanction that follows from conflicts between the two jurisdictions. For conflicts that result from the institutions of the Community this is not difficult: they will be dealt with by the Court under one of the procedures envisaged in the Treaty both at the instance of member-States or of individuals, in particular the 'application to quash (Article 173)' and the 'exception d'illegalite (Article 184)*441 '. For conflicts that result nationally there must also be a sanction but not only at the instance of the States, but also in favour of individuals who appeal to the

Treaty or to Community regulations governing their individual rights. In other words, as the Court has said, it is national courts that must be appealed to to safeguard such rights. The question then poses itself, in what circumstances must such courts exercise their control and in particular apply the self-executing norms of the Treaty or the Community regulations duly passed, when there exists a national law to the contrary. The answer must be that if the national law came into force prior to the Treaty or to the publication of the Community regulations, the rules of implied repeal must suffice. Difficulties arise, however, when the internal law came into force subsequently to the Treaty and is contrary to a self-executing rule of it; alternatively, when the national law came into force subsequently to the lawful passing and publication of a Community regulation; in such cases, however, there are real difficulties only when the internal regulation has the character of a legislative act because, if it is merely a matter of an ordinary administrative act or of a regulation, suitable quashing remedies (such as the contentieux de l'annulation or at least the exception d'illegalite )--in those countries that do not allow a full quashing action against regulations--should suffice to paralyse the effect of the internal act instead--in favour of a Community rule. In the case of a legislative act, however, one is inevitably confronted with a problem of a constitutional character. As you know, such a problem is resolved in a fully satisfactory manner in the Netherlands, where the recently amended Constitution expressly confers upon the courts power to raise the exception d'illegalite as regards such laws as are contrary to international treaties, all the more so where regulations of a self-executing character are in issue. In the Grand Duchy of Luxembourg the courts have constantly followed the same rule. In France, an almost unanimous doctrine concedes the point, relying upon Article 55 of the present Constitution which, like Article 28 of the 1946 Constitution, proclaims the pre-eminence of international treaties which have been properly ratified and published vis-a-vis relationships with national laws; certain decisions can at least impliedly be prayed in aid to this end. In Belgium, despite the absence of constitutional rules on the point, a notable doctrinal effort--which, incidentally, has received the publicly expressed approval of a very high magistrate--seems to have reached the same conclusions. Although this might at first sight appear rather paradoxical, difficulties in principle are actually met in those two countries that have a constitutional court, that is to say, Germany and Italy. In both cases the difficulties stem from the fact that the E.E.C. Treaty*442 was ratified by an ordinary Law not having the character of a constitutional Law and as such not having the power of derogating from either the rules or the principles of the Constitution. It must be clearly understood that it is not up to us to be concerned with the interpretation of the constitutions of our member-States. We limit ourselves to observing that as regards Germany (where to date the constitutional courts have not yet expressed an opinion on this point) the objections seem to come from the fact that the juridical order of our Community (of which the existence is admitted as distinct from the ordinary German jurisdiction) does not offer the citizens of the

Federal Republic the fullness of the guarantees which are allowed to them by the constitution of the country, in particular because steps of a legislative character tend to be taken within the framework of the Community by organs of a non-parliamentary nature (Council, Commission) in those cases where, by German law, they could only fall within the jurisdiction of parliament. One can but counter that by saying that the Community regulations, even the most important ones, are not legislative acts nor, as is sometimes said, 'quasi-legislative acts', but rather acts emanating from an executive power (Council or Commission) which can only act within the framework of the delegated powers that it has been allowed by the Treaty and within the jurisdictional control of this Court of Justice. It is certainly true to say that the E.E.C. Treaty has, in a sense, the character of a genuine constitution, the constitution of the Community (and from this point of view it is completed by the protocols and the schedules having the same value as the Treaty itself and not that of regulation); but for the greater part, the Treaty has above all the character of what we call a ' loi-cadre'; and this is a perfectly legitimate approach when one is dealing with a situation of an evolutionary nature such as the establishment of a Common Market in respect of which the objects to be attained and the conditions to be realised (rather than the manner of realisation) are defined in such a way that the generality of the provisions need not exclude precision: we are still far from the 'blancseeings'(or free-hand') in which certain national parliaments indulge. The citizens of the Federal Republic therefore do find within the jurisdiction of the Community certain guarantees (in particular as regard jurisdiction of control) which, albeit not identical, are still comparable to those which their own national order ensured (prior to the transfer of competence resulting from the Treaty) by the existence of a more extensive competence of parliament. It would seem therefore that the true question is to know whether the creation of such a juridical order by a Treaty ratified by an ordinary Law is compatible with the Constitution: and this is surely a*443 problem which the national constitutional tribunal is alone competent to resolve. It would seem that the same reasoning applies to Italy. In that country, as you know, a judgment of the Constitutional Court dated 24 February/7 March 1964 [FN11] (given in casu in connection with the Law creating ENEL) decided that it was possible, despite the provisions of Article 11 of the Italian Constitution, to dissociate the question of a possible violation of the Treaty as a result of the intervention of a national Law contrary to its provisions (which question, in the opinion of the court, was not relevant except as regards the responsibility of the State at international level) from the problem of the conformity of that same national Law with the Constitution: since the Treaty was ratified by an ordinary Law, a later contradictory Law should have effect in accordance with the principles that govern the succession of laws in time, from which it followed that 'there was no need to inquire whether the Law in issue violated the obligations undertaken by virtue of the Treaty', and that, for the same reason, a reference of the matter to the Court of Justice of the European communities was entirely pointless (since it could only be useful in so far as it would bear upon a violation of the Treaty, bearing in mind the interpretation of the same already given by the

Court). FN11 Suprap. 430. It is patently not for us to criticise this judgment. We merely point out (although this is purely a formal remark) that the Italian Constitutional Court refers to the conflict between the Law in issue and the Law of ratification whereas the question relates to a conflict between a Law and a treaty (ratified by an ordinary Law). But what we would insist upon are the disastrous consequences (and we do not think this expression is too strong) that such jurisprudence, if it is maintained, would risk having as regards the functioning of the system established by the Treaty and, as a consequence, the very future of the Common Market. In fact, we think we have succeeded in showing that the Common Market system is based upon the creation of a jurisdictional order separate from that of the member-State, but nevertheless intimately and organically tied to such jurisdiction in such a way that the mutual and constant consideration of the respective jurisdictions of the Community and national organs is one of the fundamental conditions of a proper operation of the system instituted by the Treaty and, consequently, of the realisation of the aims of the Community. We have, in particular, noticed that such a mutual respect requires that the self-executing regulations of the Treaty, and the regulations lawfully approved by the executive organs of the Community, should receive immediate application within the*444 member-State. Such is the jurisdictional order created by the E.E.C. Treaty and it is the function of the Court of Justice, and the Court of Justice alone, to decide upon matters pertaining to it in its judgment. If we reach the stage where the constitutional judge of one of the member-States, in the fullness of his jurisdiction, feels bound to acknowledge that such a result cannot be achieved within the framework of the constitutional rules of his own country--for instance, as regards the possibility that ordinary national laws, contrary to the Treaty, might prevail upon the Treaty itself without any judge (not even the constitutional judge) having the power to paralyse their application, so that they could only be repealed or modified by parliament--such a decision would create an insoluble conflict between the two orders and would undermine the very foundations of the Treaty. For not only could the Treaty not receive application, on the conditions mentioned in it, within the country concerned but, as a consequence of a chain reaction, it could not even profitably apply within the other countries of the Community; certainly this would be so in those member-States of the Community (such as, for instance, France) where the precedence of international treaties is only granted 'on condition of reciprocity' . In such circumstances, there would be only two courses of action open to the State concerned: either to amend its Constitution to make it compatible with the Treaty or to renounce the Treaty itself because what has happened, in effect, is that by the signature, the ratification and the deposit of the instruments of ratification, that State has bound itself vis-a-vis the partner States and could not remain passive without disclaiming its international obligation. One can easily

understand therefore why the Commission which, by virtue of Article 115, was entrusted with the task of supervising the application of the Treaty, has notified to this court its 'serious concern' at the judgment of 24 February 1964. We feel bound to add that if we have considered it necessary to present such observations it was solely to clarify the issues, and to allow everyone to accept their responsibilities. We do not for a moment, however, consider that Italy, which has always been in the forefront amongst the promoters of the European ideals, Italy, the country of the conference of Messina and the Treaty of Rome, cannot find a constitutional means of allowing the Community to live in full accordance with the regulations created under its common charter. It may be useful at this stage to recall the terms of the order of the Milan judge. We would remark in passing that he complied strictly with the rule of Article 23 of the Law of 11 March 1953 regulating the composition in the functions of the Constitutional Court, as appears in particular from the following: *445 'Whenever it is impossible to adjudge upon the proceedings independently of the solution of the constitutional question or whenever the court should decide that the objection raised is not manifestly unfounded' (in which case, in pursuance of Article 24, the order rejecting the defence of unconstitutionality must be suitably reasoned) 'the Court, after having set out the terms and the reasons of the demand that raised the question, orders that the proceedings be referred to the Constitutional Court and that the present proceedings be suspended'. Manifestly a judge who has to decide upon a reference to the Constitutional Court does not do so submissively and so to say automatically; on the contrary, he is bound to exercise a certain control; which is what M. Costa, in his oral submission, has called 'a preliminary inquiry of legality'. In this case the justice of the peace has effectively exercised such control not merely, as indeed he was bound to do by Italian law, as regards the reference to the Italian Constitutional Court but also as regards the reference to this Court. In our submission, he was perfectly right in doing so, because we feel that, despite the absence in the Treaty and in the Constitution of this Court of express provisions similar to those of Italian law, a certain control a priori of the relevance of the question of interpretation in its relation to these solutions of the proceedings--as well as upon the definition 'manifestly unfounded' of the request for a reference--is indispensable, if one wants to avoid purely dilatory demurrers and the unnecessary burden, for this Court, of irrelevant references. The foregoing observations suffice, in our opinion, to show that the Judge was not in a position where prima facie a rejection of the request for a reference was justified. The only problem which could possibly arise is to know whether in the case of a Law a judge might be justified in refusing an application in those cases where pursuant upon the interpretation given by this Court of Justice, he would be bound to reach the conclusion that such a Law was contrary to the Treaty. In other words, do Italian judges--other than the Constitutional Court--have the right to adjudge upon the issue of unconstitutionality or are they bound, at any stage in the proceedings, to refer the matter to the Constitutional Court? Otherwise, it would be undoubted that the judge should have referred the matter to the

Constitutional Court leaving it to such court to call upon you to interpret the treaty. But, Gentlemen of the Court, that is a matter relating to a division of internal competence within the jurisdiction of a member-State, a question with which you do not have to concern yourselves. The most that can be said is that the judgment that you are called upon to give will have effect also as regards the Constitutional Court which will have to bear it in mind: the reference before you, although premature as regards internal procedure, will not have*446 been useless and will have saved time. In other words, this would be a case similar to that where a court, availing itself of the rights acknowledged by Article 177 (2), refers the matter to this Court directly without following the usual internal procedure for reference. These are the various reasons--and it may be that in certain ways they might be considered superfluous, but we have thought it necessary to express them in detail, by virtue of their extreme importance of principle--for which we submit that you must reject the demurrer of 'absolute inadmissibility' raised by the Italian Government in its submissions.

(2) Examination of the matters of interpretation raised There are four such matters, Articles 102, 93, 53 and 37.

(a) Article 102 Further to the order that brought this matter before you, the violation of Article 102 appears from the fact that, contrary to the provisions of paragraph (1)of such Article, the Italian Government abstained from consulting the Commission prior to the passing of the Law of 6 December 1962. In this, as well as in the following three cases, it is a matter of deciding what, in the question before you, refers to interpretation. For our part, we notice two interpretative questions that may affect the present proceedings, the second of which merely has an ancillary character. (1) Does a default, by a member-State, in complying with the formalities prescribed by Article 102, result in the complete illegality of the act in relation to the Treaty and is it such that the national judges are bound to take it into account? (2) If the answer is in the affirmative, what is the nature of the formalities? In particular, can the irregularity relating to the lack of official consultation on the part of the government concerned be offset by proof that the Commission had such knowledge of a Bill and of its provisions as to enable it to forward, if necessary, its observations to the member-State? As regards point 1,the answer in our opinion must be in the negative. We are dealing here with a very brief section headed 'the reconciliation of legal systems' . It is obvious that until such time as legal systems are ' reconciled', that is to say, modified (except for those that might serve as specimens for a reconciliation), they exist: it is therefore under the guise of 'directives' that the Council can act in this field in accordance with Article 100. Articles 101 and 102 consider the possibility that, a reconciliation having been made and it having produced the

effects that were expected of it, one should find that the existence of disparities between legal systems*447 'makes for conditions of competition on the Common Market and, as a consequence, creates a distortion which must be eliminated'; in such cases one can draw a line between the distortion resulting from existing regulations (Article 101) or from proposed regulations 'from which one may assume'that they do not envisage a distortion (Article 102). In the case of Article 101, there is no doubt that existing legislation remains in full force until such time as it is modified, possibly as a result of the directives of the Council in pursuance of Article 100. There remains Article 102. This has manifestly as its object the attempt to prevent, and to avoid, the fait accompli--it is indeed preferable to avoid the intervention of an act of legislative or of other nature such as to produce distortion rather than to proceed to eliminate it once it has come into existence: hence the procedure for preliminary consultation envisaged by Article 102. Should we, as a result, acknowledge that Article 102 has such a self-executing character as to enable national courts to decide at the instance of individuals that it has been violated? We do not think so. This would be tantamount to acknowledging that national jurisdictions are qualified to appreciate the possibilities of distortions which the act might produce in accordance with Article 101: this carries with it a more or less difficult judgment on the merits and as such it cannot reasonably be given apart from any intervention of the organs of the Community, in particular of the Commission. Without any doubt we reject the idea that an interested government can itself be judge in this matter and enjoy a discretionary power enabling it to seise this court with the matter or not: what such a State can do is objectively to pronounce upon the relevance of these possibilities and, if necessary, to avail itself of the powers granted by Article 169 and obtain from this court the ascertainment of the failure by the State previously to consult the Commission. We would add that in fact the Commission has sources of information such as to enable it, at least in the more important cases, to intervene in good time, in particular as regards legislative acts which, in our countries, are not really clandestine! In this particular case, we know that this was so. As regards the second point (which we are dealing with for the sake of completeness), we would incline to the following interpretation: the formalities envisaged by Article 102 are indeed of a compulsory nature for the State concerned. Under what circumstances then must these formalities be complied with? In our opinion this can only be by means of an official communication addressed by the Government to the Commission: a parliamentary question, for instance, would not suffice. If we are dealing with a Bill, it would appear reasonable to expect that the Bill should be notified to the Commission prior to being tabled in parliament*448 or at least prior to such time when parliamentary procedure is too advanced and the Government is more or less already committed. But as regards the sanction of this obligation, we do not think that this should necessarily result in a State having failed in its duties which in any case is a matter to be raised before this Court. If it can be proved that the Commission was

perfectly cognisant of the Bill and at such time as it could still get in touch with the Government concerned and (as in the case in issue) that it refrained from intervening with full knowledge of the facts then we would submit that this irregularity should be deemed to have been waived. We do not think it is a good idea to exaggerate formalism in the relations between the Community and its member-States: the relations between the two should be inspired with the spirit of co-operation which is indispensable for a healthy application of the Treaty. We must stress the fact that we have only dealt with this matter in an ancillary manner because it is our opinion that the violation by a member-State of the obligations it has undertaken by virtue of Article 102 of the Treaty is only relevant to the applicability of Articles 169, 170 and 171 and, as far as internal law is concerned, cannot result in a national court declaring that any Act passed in violation of such Articles is null or inapplicable.

(b) Article 93 We would give a similar opinion as regards Article 93. In our submission the obligations of the member-States in pursuance of paragraph (3) of such Article('the Commission must be informed in good time to enable it to present its observations on Bills that tend to create or modify aids',) can only be declared in pursuance of the procedure envisaged by Articles 169 to 171 . As regards the 'compatibility of the Bill with the Common Market as per Article 92'--upon which the possible violation of the Treaty depends--suffice it to read Article 92, in particular paragraph (3),to be convinced that this question of compatibility implies, even here, a delicate judgment of the merits directly affecting economics or political interests of the State concerned in the light of the necessities of the Common Market: which judgment cannot possibly be left to the sole assessment of the national court without any intervention by Community organs or by governments. In our submission, therefore, it is impossible to acknowledge as self-executing the provisions of Article 93.

(c) Article 53 We are dealing here with the right of establishment. The Milan Justice of the Peace referred to this Article because 'the Law of 6 December 1962 *449 introduced in Italy certain restrictions to the establishment and the administration in Italian territory of enterprises and companies of other member-States for the production and the sale of electric energy'. Two questions of interpretation seem to stem from this remark: The first one relates once again to the self-executing character, or not, of the provision referred to. This provision also states: 'member-States must not introduce in their territory new restrictions on the establishment of businesses of other member-States subject to the other provisions of this Treaty'. Contrary to the opinion we have adduced with regard to Articles 102 and 93, we submit that we are dealing here with a self-executing provision. The rule is clear, precise and, it would appear, requires no preliminary examination by the Commission and the Government nor any judgment on its merits: we are much

closer to such rules than to those contained either in Article 12 or in Article 31 concerning 'standstills' in matters of customs duties or quantitative restrictions. Nevertheless--and it is the second interpretation which in our opinion it is advisable to adopt--Article 53cannot in our submission be interpreted except in the light of Article 52. Now, Article 52 concerns 'restrictions to the freedom of establishment of nationals of a member-State within the territory of another member-State' and freedom of establishment itself is defined in the following manner in sub-paragraph (2): freedom of establishment means free access to and exercise of unpaid activities as well as the formation and the administration of enterprises and in particular of companies in accordance with Article 58 (2) in accordance with the conditions laid down by the legislation of the country of establishment for its own nationals. To comply with the provisions of Article 53, therefore, it is sufficient that new restrictions should not be introduced as regards the existence of discrimination between the nationals of member-States; as far as we are concerned, the problem does not even arise if the provision under consideration does not make any such discrimination. It is of course possible that certain restrictions on the freedom of establishment result as far as aliens are concerned from a measure adopted by a member-State, for instance in cases of nationalisation; but such a measure, quite in order in itself under Article 222, will not be contrary to Article 53 if the conditions of access to the exercise of the activity in issue are restrained or suppressed in the same manner as regards nationals of the country and without any discrimination whatsoever vis-a-vis aliens. We know that as far as ENEL is concerned such is the case; but this of course is a matter which it is for the national judge to find. *450 On this point therefore we adopt the first of the two interpretations suggested by the Commission in its observations, since the second one seems to us to be outside the field of the regulations on the right of establishment as they result from Articles 53 et seq.

(d) Article 37 On this point the judgment referring the matter to this Court is particularly laconic: 'In consideration of the facts, it says, in the last resort Article 37 of the Treaty instituting the E.E.C. is to be taken into account because the Law of 6 December 1962 creates a new monopoly of public right excluding the nationals of other member-States.' We think we can discover, in connection with Article 37, two points of interpretation that may affect the proceedings, (1) What is the field of application of such Article and in particular is it applicable to a public service for the production and distribution of electricity such as ENEL is? (2) If the answer to the above is in the affirmative, do the provisions of Article 37 have at least partially a self-executing character?

First Question

Both the Italian Government and ENEL rely substantially upon the character of public service that the body in issue presents and go on to maintain that its activities are wholly outside the sphere of application of Article 37. They are particularly insistent upon the fact that such activity is alien to those of ' commercial monopolies' which alone are considered by Article 37 and which affect particularly the exchanges between member-States. They further point out that the creation of ENEL was brought about by the essential aim of eliminating the cartels which, prior to such time, had a real monopoly position and furthermore that, well apart from running counter to the provisions of the Treaty, the establishment of ENEL was wholly in accordance with the Treaty's objectives. Gentlemen of the Court, we are convinced that there is a great deal of truth in these remarks. Admittedly from a strictly legal point of view they are not altogether of a determining nature. Indeed the Treaty, at least in Article 37, has not ventured into distinctions based upon public service; and this is understandable. One is dealing there with a notion which varies considerably from one country to the other and a precise definition of which, already difficult as far as national law is concerned, is undoubtedly impossible at a Community level. Article 37 is part of the section relating to the elimination of quantitative restrictions between member-States. In this connection,*451 the Treaty has acknowledged that commercial monopolies raise particular problems which, short of suppression pure and simple, which indeed is not dictated, require measures of administration of a progressive nature well outside the frame-work of a simple arithmetical increase of the quotas within the conditions of Article 33. The essential object of these, however, is nonetheless 'the free circulation of goods' in accordance with the heading of Part I (under which appear the provisions in issue) and the restrictions referred to are those which are against such free circulation because of the discriminatory conditions between the nationals of member-States. The notion of 'national monopolies having a commercial character' to which Article 37 is applicable must be included within this framework. The Article indeed goes further by defining them: 'the provisions of this Articleapply to any body by means of which a member-State de jureor de facto controls, manages or substantially influences, directly or indirectly, imports and exports between member-States. These provisions apply equally to delegated State-monopolies' (these delegated monopolies are obviously those which fall within the scope of the definition which has just been given). The wording, taken, as it should be, in its context, seems to us perfectly clear: it is not the legal form that matters nor the legal nature of the body within the framework of national public law, but rather the effective part played by such body in the exchanges between member-States. It follows that one cannot exclude a priori a public service, even if it is an industrial or commercial public service, from the sphere of application of Article 37. On the other hand--and it is here that the submissions of the Italian Government and of ENEL become particularly relevant--it is obvious that this need not be the case where we are dealing with the public service as such, i.e., one having as its

essential scope the production and distribution of electricity but without aiming at making such production or distribution an object of international commerce; it could only be the case if, although international commerce were not the main object of the body in question, the sale of electricity abroad reached, or was about to reach, such a volume that such a body should be considered as influencing or capable of influencing ' substantially'business with member-States. There is no doubt that the qualification 'substantially' refers grammatically only to the verb ' influences' and not to the previous two verbs (i.e., controls and administers); it follows therefore that the substantial influence, actual or potential, upon either imports or exports between member-States is the only relevant consideration when dealing with the provisions in issue, whether such influence shows or can be said to show through either a power of control or a power of administration or in whatever other matter. It is up*452 to member-States, as the need arises, to take such progressive measures as are necessary and it is up to the Commission to address to the States concerned whatever recommendation they consider necessary for a proper execution of paragraph (6). In the case before you it cannot be doubted that ENEL is incapable of being considered as having 'a substantial influence' upon trade between member-States because the 'international trade' of ENEL is limited to a few frontier exchanges between Italy and France. As regards the 'potential' influence resulting from the powers of management and of control by the Italian State, it is for the Commission to decide whether they are of such nature as to justify protective measures in accordance with paragraph (1). In such case, the Commission should, if necessary, address the recommendations envisaged by paragraph (6) to the State directly. But until such time as this takes place, existing legislation, which ex hypothesi existed prior to the coming into effect of the Treaty, remains valid within the national order and must be applied by national courts. We may recall here that by virtue of Article 90any exchange, no matter how small, made by 'enterprises charged with the running of services having a general economic interest'is still, at least in principle, subject to the rules of the Treaty and in particular to those on competition; nor can they be exempted from such rules where Article 37 does not apply.

Second question Do the provisions of Article 37 have, or not, a self-executing character? We have already replied above in the negative. It seems to follow that the provisions of Article 37 (1), coupled with those of paragraphs (3) to (5), are not immediately applicable within the national order: we are dealing with the progressive adaptation of a monopoly situation which must be made effective by member-States pursuant upon those recommendations which the Commission is empowered to address to them under paragraph (6). On the other hand, the difficulty does arise when we are dealing with the rules relating to ' standstill'dictated by paragraph (2). In practice, however, there can be no doubt that in principle a rule on standstill must be observed more strictly than one relating to a programme of

improvement. We find here the rather drastic wording of Articles 12 and 31: 'Member-States must abstain ...' which the practice of this Court has interpreted as not preventing a direct application sanctioned by national judges. The most that can be said is that Article 37, regardless of its aim-- which is to regulate the particular problem of monopolies--is part of chapter two of Section 1 and this chapter relates to the elimination of quantitative restrictions within the sphere of member-States;paragraph (2) of Article 37 *453 appears therefore as a reminder and adaptation for cases of monopoly of the rule relating to standstill as provided by Article 31 which you yourselves have already considered as directly applicable. Not to acknowledge therefore the direct effect of Article 37 (2) would require very compelling reasons of the kind which we have submitted should apply in the application of Article 102 and Article 93. But is this justified? In our submission, one should make a distinction between the first and the second part of the text. In the first part it is said that 'member-States shall abstain from any new measure contrary to the principles enunciated in paragraph (1) '. The word ' principles' speaks for itself: it is surely impossible to know whether a measure is or is not contrary to the 'principles' of paragraph (1) without making a more or less difficult and subjective appreciation which will inevitably interfere with the general character of the programme of improvement established, or capable of being established, by virtue of paragraph (1). Such an appreciation cannot reasonably be made outside the framework of the discussions between the Commission and the member-State or States that are immediately concerned: such a question is particularly relevant with regard to the relationships between member-States and the Community and the possible violation by a member-State of Article 37 (2) (i) cannot be raised except under the procedure dictated by Articles 169 to 171. We would view in a different manner, however, the second part of the wording of Article 37 (2): '... or that restrict the effect of the Articles relating to the elimination of customs duties and of quantitative restrictions between member-States.'In practice, we are returning here to a more direct application of the rule on stand-still in matters of customs duties and quotas. It is true to say that the wording does not only refer to measures which in themselves might amount to a re-establishment or an increase in customs duties, or to a re-establishment or a reduction of quotas, but also to those measures that ' restrict the effect of the articles relating' to elimination; and this may leave a certain margin for consideration. Nevertheless we are inclined to think that the appreciation, at times quite delicate, that must be made in certain cases, cannot in itself represent an obstacle to the application of a sanction by national courts in favour of interested parties, because the rule on standstill is in such cases directly affected and its violation may result in an immediate effect on the rights of individuals and on private legal relationships. But in our submission, such a sanction can only be applied with regard to effective measures of restriction that interfere directly with ' acquired rights' which are allowed to individuals by present regulations: a purely 'potential' restriction*454 can only be considered by the Commission and under the procedure envisaged by Articles 169 to 171.

We therefore conclude as follows: 1. The demurrer of 'absolute inadmissibility' raised by the Italian Government should be rejected. 2. Articles 102, 93, 53 and 37of the Treaty should be interpreted as follows: (a) the violation by a member-State of the obligations it has undertaken by virtue of Article 102is relevant only as far as the procedure of Articles 169 to 171 is concerned and cannot result in the nullity or inapplicability (in national law and to be declared by national courts) of whatever step was taken in violation of such Article. (b) A similar interpretation should apply to Article 93. (c) As regards Article 53, we submit that: (i) It produces immediate effect and creates individual rights which national courts must safeguard. (ii) In conjunction with Article 52 (2) it must be interpreted in the sense that it prevents any new restriction to the freedom of establishment carrying with it discrimination between the nationals of member-States. (d) Article 37 (2) produces immediate effects and creates individual rights which national courts must safeguard as regards new measures introduced by a member-State that effectively result either in the introduction of new customs duties or taxes of an equivalent effect or of an increase in such duties, or in the establishment of new quantitative restrictions or equivalent measures. 3. We agree with the Milan judge as regards the costs of the proceedings before this Court. JUDGMENT OF THE EUROPEAN COURT As regards the application of Article 177 It was submitted that the question posed had the aim, by means of Article 177, of obtaining a judgment upon the conformity of a law with the Treaty. This Article provides that national courts, whose judgments, as in the case in instance, are without appeal, must refer the matter to this Court so that a preliminary decision may be given upon the 'interpretation of the Treaty'when such a question is raised before them. If such a provision is applied, this Court can neither apply the Treaty to a specific case, nor decide upon the validity of a national law with regard to the Treaty itself, contrary to what would be possible under Article 169. *455 It was further submitted that, in dealing with the judgment of the national court, this Court has power to separate those questions which alone pertain to the interpretation of the Treaty. Consequently a decision would be given not upon the validity of an Italian Law with regard to the Treaty, but upon the interpretation of the Articles mentioned above in connection with the problems raised by the Milan judge. On the other hand, it was also submitted that the Milan judge called for an interpretation of the Treaty which was not at all necessary for the solution of the proceedings before him. Since Article 177 is based upon a clear separation of functions between national courts and this Court, it cannot give us power either

to investigate the facts of this case or to criticise the reasons and the aims of the request for an authoritative interpretation. For its part, the Italian Government maintains that the request of the Milan judge is absolutely 'inadmissible' inasmuch as a national court, which is bound to apply a national law, cannot avail itself of Article 177. As opposed to other international treaties, the Treaty instituting the E.E.C. has created its own order which was integrated with the national order of the member-States the moment the Treaty came into force; as such, it is binding upon them. In fact, by creating a Community of unlimited duration, having its own institutions, its own personality and its own capacity in law, apart from having international standing and more particularly, real powers resulting from a limitation of competence or a transfer of powers from the States to the Community, the member-States, albeit within limited spheres, have restricted their sovereign rights and created a body of law applicable both to their nationals and to themselves. The reception, within the laws of each member-State, of provisions having a Community source, and more particularly of the terms and of the spirit of the Treaty, has as a corollary the impossibility, for the member-State, to give preference to a unilateral and subsequent measure against a legal order accepted by them on a basis of reciprocity. In truth, the executive strength of Community laws cannot vary from one State to the other in favour of later internal laws without endangering the realisation of the aims envisaged by the Treaty in Article 5 (2) and giving rise to a discrimination prohibited by Article 7. In any case, the obligations undertaken under the Treaty creating the European Community would not be unconditional, but merely potential if they could be affected by subsequent legislative acts of the signatories of the Treaty. Furthermore, whenever the right to legislate unilaterally is allowed to the member-States, it is under a precise and special provision (see for instance Articles 15, 93 (3), 223, 224 and 225*456 ). It is also true that requests for derogation by member-States are subject to a special procedure of authorisation (Articles 8 (4), 17 (4), 25, 26, 73, 93 (2), 93 (3) and 226) which would be meaning-less if the member-States could exempt themselves from their obligations by means of an ordinary Law. The pre-eminence of Community law is confirmed by Article 189which prescribes that Community regulations have an 'obligatory' value and are 'directly applicable within each member-State' . Such a provision which, it will be noticed, admits of no reservation, would be wholly ineffective if a member-State could unilaterally nullify its purpose by means of a Law contrary to Community dictates. It follows from all these observations that the rights created by the Treaty, by virtue of their specific original nature, cannot be judicially contradicted by an internal law, whatever it might be, without losing their Community character and without undermining the legal basis of the Community. The transfer, by member-States, from their national order, in favour of the Community order of the rights and obligations arising from the Treaty, carries with it a clear limitation of their sovereign right upon which a subsequent unilateral law, incompatible with the aims of the Community, cannot prevail. As a consequence, Article 177 should be applied regardless of any national law in

those cases where a question of interpretation of the Treaty arises. The questions posed by the Milan judge as regards Articles 102, 93, 53 and 37 aim at obtaining a ruling first, upon whether such provisions produce immediate effects and create rights which national courts are bound to safeguard and secondly, if the answer to the foregoing is in the affirmative, what is their meaning. As regards the interpretation of Article 102 Article 102 provides that when 'there is reason to believe' that as the result of a legislative provision a 'distortion' might arise, the member-State that nevertheless wishes to proceed should 'consult the Commission' ; the Commission has power to recommend to the member-State the adoption of suitable measures to ensure possible distortion. This Article, placed in the section devoted to the 'reconciliation of legislation', tends to eliminate any aggravation of differences between national legislation with regard to the objects of the Treaty. By virtue of this provision, member-States have limited their freedom of initiative and have agreed to submit to a proper procedure of consultation. Furthermore, member-States have unambiguously bound themselves to a prior consultation of the Commission in all those cases where their legislative projects might create a risk, no matter how feeble, of a possible distortion. They*457 have, therefore, undertaken an obligation with regard to the Community which binds them as States, but which does not create within their national order rights that national courts are bound to safeguard. On its part, the Commission is bound to ensure proper respect of the provisions of this Article but this obligation does not allow individuals the right of alleging, within the framework of Community law and Article 177, either a failure by the member-State or by the Commission. As regards the interpretation of Article 93 In pursuance of paragraphs (1) and (2) of Article 93 the Commission, together with member-States, proceeds to 'a permanent examination of the system of aids existing within such State' with a view to the adoption of such measures as are necessary for a proper operation of the Common Market. By virtue of Article 93 (3), the Commission has a right to be informed, in good time, of plans that tend to create or modify aids, and the member-States concerned cannot give effect to such measures prior to the compliance with the procedure of the Community and, in cases of divergence, of the procedure before this Court. These provisions, placed under the heading of the Treaty that deals with 'aids allowed by member-States', aim on the one hand at a progressive elimination of existing aids and on the other at avoiding the possibility that new aids, capable of favouring either directly or indirectly in an appreciable manner or form all products, be created by such State for the conduct of their affairs 'under any form whatsoever' thus threatening, although not actually, the absence of competition. By virtue of Article 92 the member-States have acknowledged such aids as

incompatible with the Common Market and have implicitly undertaken that they will not create any more outside the exceptions envisaged in the Treaty itself; furthermore, by Article 93, member-States have agreed to submit to appropriate procedures both the suppression of existing aids and the creation of new ones. They have further undertaken formally to inform the Commission in good time of their new plans and, by accepting the procedure envisaged by Article 93, they have undertaken an obligation with regard to the Community that binds them as States, which does not create rights, which, apart from the last provision of Article 93 (3), are outside this particular case. On its part the Commission is bound to ensure that the provisions of this Article are complied with and has further undertaken to proceed jointly with member-States to a permanent examination of these aids; but such obligation does not allow individuals the right to allege, within the framework of Community law and by virtue of Article 177, either failure by the member-States concerned, or by the Commission. *458 As regards the interpretation of Article 53 By virtue of Article 53 member-States, subject to the provisions of the Treaty, undertake not to introduce within their own territory new restrictions to the right of establishment of nationals of other States. From a legal point of view such obligation resolves itself into a simple abstention. It admits of no condition and is not subject, either as regards its execution or its effect, to the intervention of any act either by State or by the Commission. The obligation is complete in itself and legally perfect and it is consequently capable of producing immediate effect as regards the relations between member-States and their subjects. A prohibition which is expressed so formally, which came into effect within the Community with the Treaty itself and as such was accepted within the system of member-States, becomes their own law and immediately affects their nationals as regards whom it creates individual rights which their national courts are bound to safeguard. This suggested interpretation of Article 53demands that it should be considered within the context of the section relating to the right of establishment where Article 53 is to be found. This section, after dictating--in Article 52--a progressive elimination of 'restriction on the freedom of establishment of nationals of one member-State within the territory of another', has also, in Article 53, prescribed that such States should not introduce 'new restriction on the establishment within their territory of nationals of other member-States'. The question then arises as to the conditions subject to which the nationals of a member-State have a right of establishment. This is made quite clear by Article 52 (2) which allows access to unpaid activities, to the constitution and to the administration of companies 'under the same conditions as are laid down by the legislation of the country of establishment for its own nationals'. Compliance with Article 53 therefore requires that no new rule should subject the establishment of nationals of other member-States to a more severe regulation than that which is prescribed for nationals of the country of establishment, whatever may be the laws relating to such enterprises.

As regards the interpretation of Article 37 By virtue of Article 37 (1) member-States shall gradually so manage their 'national monopolies of a commercial character', as to exclude all discrimination between nationals of member-States as regards conditions of supply and of sale. Article 37 in its second paragraph also provides that each State shall refrain from adopting any new measure contrary to such principle. In this way, member-States have undertaken a dual obligation: the former, an active one, aimed at an improvement of their national monopolies; the latter, a passive one, aimed at avoiding any new measure. It is*454 in connection with this latter obligation that an interpretation is called for as also with the prerequisites of such an interpretation. Article 37 (2) contains an unconditional prohibition which results not only in an obligation to do something but in an obligation to do nothing. This obligation is not subject to any reservation that might subject its coming into operation to a positive act of national law. On the contrary, by its very nature, it is capable of producing immediate effects as regards the legal relationship between member-States and those within their jurisdiction. A prohibition expressed so formally, coming into effect within the framework of the Community with the Treaty itself and consequently adopted by the legal systems of member-States, is tantamount to the law of such States and affects directly their nationals in whose favour it creates individual rights which national courts are bound to safeguard. The suggested interpretation of Article 37,by reason of the complexity of the context and of the interaction between paragraphs (1) and (2), must also be considered in relation to the section where it appears. Such section is devoted to 'the elimination of quantitative restrictions between member-States'. When Article 37 (2) recalls the ' principles enunciated in paragraph (1)', it aims at preventing the establishment of any new measure of 'discrimination between nationals of member-States' as regards the 'conditions of supply and of sale' . In fact, such aim having been precisely laid down, Article 37 (1) describes the means by which it might be contradicted and goes on to prohibit them; and by reference to Article 37 (2)all new monopolies or bodies envisaged by Article 37 (1) are prohibited in so far as they tend to introduce new measures of discrimination as regards the conditions of supply and of sale. It therefore becomes a careful judge to ascertain first of all how this aim is frustrated, that is to say, whether a new discrimination between the nationals of member-States as regards the conditions of supply and of sale results in a violation itself, or is its consequence; in this connection one must also consider more carefully paragraph (1) of Article 37. This prevents the creation not indeed of all national monopolies but only of those that present 'a commercial character' and even of these, in so far as they tend to introduce the discriminations aforesaid. It follows, therefore, that to come within the terms of the prohibition of this Article, national monopolies and bodies must on the one hand have as objects transactions in commercial products capable of competition and exchanges between member-States; and on the other hand play a leading part in such exchanges. It is up to the judge of the merits to ascertain in each case whether an economic activity is concerned with regard to such exchange that can, by virtue of their nature and

the technical or international conditions to which they*455 are subject, be such as to play a leading part in the import and export between nationals of member-States. Costs Any expenditure incurred by either the Commission of the E.E.C. or the Italian Government which have submitted their observations to this Court cannot be refunded. In this particular case, at any rate as regards the parties to the proceedings pending before the Milan judge, the proceedings are really of an interlocutory nature before such judge. Order THE COURT, for these reasons, HEREBY DECIDES: On the defence of inadmissibility based upon Article 177: 1. The problems submitted by the Milan judge in pursuance of Article 177 fall within our jurisdiction in so far as, in the case in instance, they relate to the interpretation of provisions of the E.E.C. Treaty and no subsequent unilateral act can be in conflict with Community rules. As far as the law is concerned: 2. Article 102 does not contain provisions capable of creating rights for individuals which national courts are bound to safeguard. 3. The provisions of Article 93, in so far as they relate to the proceedings before us, go no further than the provisions of Article 102. 4. Article 53 constitutes a Community rule capable of creating individual rights which national courts are bound to protect. The effect of these provisions is to prohibit any new rule resulting in a more severe regulation of the establishment of nationals of other member-States than that which is applicable to nationals of one State whatever may be the legal nature of the enterprise. 5. Article 37 (2), in all its provisions, creates a Community rule capable of giving rise to individual rights that national courts are bound to safeguard. Within the framework of the present proceedings, these provisions have as their object the prohibition of any new measure contrary to the principles of Article 37 (2) that is to say any measure having as its object or as its consequence a new discrimination between the nationals of member-States as regards the conditions of supply and of sale by means of monopolies or bodies which on the one*456 hand have as their object transactions of a commercial nature capable of competition and exchanges between member-States and which on the other hand play a leading role in such exchanges.

6. The decision on the cost of the proceedings before us is referred to the Milan judge.

(c) Sweet & Maxwell Limited [1964] C.M.L.R. 425 END OF DOCUMENT