REPORT FOR THE HEARING

in Case C-339/89 ( *1 )

I — Facts

A — Legal background to the main proceedings

1.In 1980 and 1981 the French company Alsthom Atlantique (hereinafter referred to as ‘Alsthom’) sold two cruise vessels to the Netherlands company Holland America Tours (hereinafter referred to as ‘HAT’). As stipulated in the contract, the vessels were fitted with engines which Alsthom ordered from the French company Compagnie de construction mécanique Sulzer (hereinafter referred to as ‘Sulzer’). Sulzer turned to a German subcontractor to fulfil the order. On delivery of the vessels HAT claimed that the equipment supplied by Sulzer was not functioning properly, and invoked the arbitration clauses contained in the contracts which it had concluded with Alsthom. Alsthom then brought various actions before the Tribunal de commerce, Paris, seeking, in particular, an order requiring Sulzer to indemnify it against any order which might be made against it on the application of HAT. Sulzer in turn served a third-party notice on its insurer Union des assurances de Paris (hereinafter referred to as ‘UAP’), seeking indemnity in respect of any order made against Sulzer at the request of Alsthom.

‘ Article 1641

The vendor shall be liable for any latent defects in the goods sold which render them unsuitable for their intended use or which so restrict their intended use that the buyer would not have purchased them, or would have paid less for them, if he had been aware of such defects.

Article 1643

He (the vendor) shall be liable for any latent defects, even if he is unaware of those defects, unless he stipulates that he shall not be liable.’

The French Cour de cassation has interpreted Article 1643 of the Civil Code as meaning that a manufacturer or person selling goods by way of trade is deemed to be aware of defects in goods which he has sold and therefore he may not rely on a clause exempting or limiting in advance liability for latent defects. Under the case-law in question, clauses limiting liability are permissible only where they are included in contracts concluded between traders engaged in the same specialized field.

B — The question referred for a preliminary ruling

4.The Tribunal de commerce considered that the dispute raised problems of interpretation of provisions of Community law and by judgment of 10 May 1989 it stayed the proceedings and referred the following question to the Court for a preliminary ruling under Article 177 of the EEC Treaty:

‘Are the provisions of Articles 2 and 3(f), read together with those of Articles 85(1) and 34, of the EEC Treaty to be interpreted as prohibiting the application of a Member State's case-law which, by not allowing persons selling goods by way of trade to prove that on the date on which the goods were delivered they were unaware of a defect in the goods, has the effect of preventing them from relying on Article 1643 of the French Civil Code, which allows them to limit their liability when unaware of the defect, in the same way as their competitors in the other Member States may do under the provisions of their own national law?’

In the grounds of the judgment requesting a preliminary ruling, the national court stated that ‘because of the discriminatory position in which French undertakings are placed in relation to their foreign competitors, the court cannot remain indifferent to the arguments advanced by the parties’.

II — Procedure

5.The judgment requesting the preliminary ruling was received at the Court Registry on 3 November 1989.

6.Pursuant to Article 20 of the Protocol on the Statute of the Court of Justice of the European Communities written observations were submitted by:

Compagnie de construction mécanique Sulzer SA, represented by Michel Normand, Avocat at the Cour d'appel (Court of Appeal), Paris;

Union des assurances de Paris, represented by Alain Tinayre, Avocat at the Cour d'appel, Paris;

the Commission of the European Communities, by J. Curral, a member of its Legal Department, assisted by H. Lehman, a French civil servant on secondment to the Commission's Legal Department, both acting as Agents.

7.Upon hearing the Report of the Judge-Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any preparatory inquiry.

8.By decision of 13 June 1990, the Court referred the case to the Second Chamber under Article 95(1) and (2) of the Rules of Procedure.

III — Summary of the written observations submitted to the Court

‘(a)

Was it not contrary to the Treaty for the case-law of the French Cour de cassation to prohibit manufacturers and persons selling goods by way of trade from proving that they were unaware on the date of delivery of the defect in the goods they supplied?

(b)

Is it contrary to the Treaty that the aforesaid case-law prohibits manufacturers and persons selling goods by way of trade from relying on the provisions of Article 1643 of the French Civil Code, under which a vendor may limit or exclude his liability when unaware of the defect, in the same way as their competitors in the other Member States may do under the provisions of their own national law?’

10.Sulzer and UAP also claim that the clauses limiting liability contained in the contract between Alsthom and HAT should be set aside as between those two traders, which are not engaged in the same specialized field. Should there be a latent defect in goods supplied by a German subcontractor with whom Sulzer dealt under a contract also including clauses limiting liability, it is possible that Sulzer might have to bring third-party proceedings against that subcontractor and that the latter might rely on rules of German law under which clauses limiting liability are lawful. Thus, it is clear that, owing to the case-law of the French Cour de cassation, French parties to international contracts, irrespective of whether they relate to imports or exports, are placed in a discriminatory situation compared with parties from the other Member States with whom they have concluded contracts. Such discrimination is manifestly contrary to the EEC Treaty.

12.Sulzer and UAP also cite the judgment in Case 83/78 Pigs Marketing Board v Redmond [1978] ECR 2347 as authority for their view that the application of the case-law of a court of a Member State can give rise to an infringement of the Treaty. It follows from the judgments in Case 229/83 Leclerc v Au blé vert[1985] ECR 1 , in Case 231/83 Cullet v Leclerc [1985] ECR 305 and in Case 123/83 BNIC v Clair [1985] ECR 391 that Article 3(f) of the Treaty, in conjunction with Articles 5, 85 and 86 of the Treaty, imposes on the Member States, and thus on their national courts, a general duty not to jeopardize the effectiveness of the competition rules applicable to undertakings.

13.Sulzer and UAP claim, finally, that a decision of a court of a Member State manifestly constitutes a measure issuing from a public authority for the purposes of Article 2 of Commission Directive 70/50/EEC of 22 December 1969, based on the provisions of Article 33(7), on the abolition of measures which have an effect equivalent to quantitative restrictions on imports and are not covered by other provisions adopted in pursuance of the EEC Treaty (OJ, English Special Edition 1970 (I), p. 17).

15.The Commission observes, by way of preliminary remark, that although Council Directive 85/374/EEC of 25 July 1985 on the approximation of the laws, regulations and administrative provisions of the Member States concerning liability for defective products ( OJ 1985, L 210, p. 29 ) is inapplicable in the present case, it contains rules from which the Community philosophy with regard to product liability can be identified. Thus, Article 1 of the Directive is based on the principle of liability without fault on the part of the producer. According to the second recital of the Directive, that is the sole means of adequately solving the problem of a fair apportionment of the risks inherent in modern technological production. According to the Commission, Article 15 of the Directive allows each Member State, subject to compliance with a notification procedure, to maintain or provide in its legislation that the producer is to be liable even if he proves that the state of scientific and technical knowledge at the time when he put the product into circulation was not such as to enable the existence of a defect to be discovered.

16.In the Commission's opinion, Article 2 of the Treaty has no binding effect and, therefore, cannot be infringed by a prohibition by which a person selling goods by way of trade may not relieve himself from liability vis-à-vis a purchaser. The article in question, which is to be found in the part of the Treaty entitled ‘Principles’, sets out the task of the Community and the means which it is to use in order to attain its aims. Those means involve ‘establishing a common market’ and ‘progressively approximating the economic policies of Member States’. The word ‘progressively’ implies that that approximation is to take place as the work of harmonization proceeds. Thus, according to the Commission, Article 2 does not contain directly applicable rules but establishes political objectives. In support of that view, the Commission cites the judgment in Case 126/86 Giménez Zaera v Instituto Nacional de la Seguridad Social [1987] ECR 3697 , in which the Court stated that the ‘promotion of an accelerated raising of the standard of living’, within the meaning of Article 2 of the Treaty, was one of the aims which inspired the creation of the European Economic Community and which, owing to its general terms and its systematic dependence on the establishment of a common market and progressive approximation of economic policies, cannot impose legal obligations on Member States or confer rights on individuals.

17.According to the Commission, for the purpose of Article 34 of the Treaty, ‘measures’ means laws, regulations, administrative provisions, administrative practices, and all instruments issuing from a public authority. According to the Commission, consistently applied case-law can give rise to such a measure in so far as it constitutes a series of judicial decisions issuing from public authorities. In support of that argument the Commission cites the judgment in Case 58/80 Dansk Supermarked v Imerco [1981] ECR 181 . The Commission infers from the judgments in Case 15/79 Groenveld \Produktschat voor Vee en Vlees [1979] ECR 3409 , Case 155/80 Oebel [1981] ECR 1993 , Case 286/81 Oosthoek's Uitgeversmaatschappij [1982] ECR 4575 , Case 172/82 Fabricants raffineurs d'huile de graissages Inter-Huiles [1983] ECR 555 and in Case 237/82 Jongeneel Kaas v Netherlands [1984] ECR 483 that for a measure to fall within the scope of Article 34 of the Treaty there must be both a specific restriction of patterns of trade and a difference in treatment providing a special advantage for national production or for the domestic market of the State in question.

The Commission therefore maintains that it is necessary to establish whether the fact that the vendor cannot exempt himself from liability for latent defects in the goods sold is intended to restrict exports or has that effect. In the Commission's opinion, the case-law at issue certainly does not set out to achieve such a restriction of patterns of trade; its real aim is to ensure fair trading by providing better protection for purchasers of products. The purchaser is not qualified to discover latent defects at the time of purchase. This aim is similar to the aim pursued by Council Directive 83/374, cited earlier.

Neither does the case-law of the French Cour de cassation have any effect on patterns of exports. Moreover, even if it did, all exports from the Member State concerned would be affected. The absence of any restrictive effect is due in the first place to the fact that expon contracts are subject to the doctrine of autonomy, under which the parties to an international contract are free to choose the law governing their contractual relations. The Commission points out that that principle was established in France by a judgment of the Cour de cassation of 5 December 1910. Consequently, where an export contract is involved traders may choose a law which does not contain the rule at issue. Moreover, leaving aside the fact that a rule which is not binding cannot have any effect on commercial conduct, the Commission claims that it has not been established that the inability to exempt oneself from liability for latent defects, where such liability exists, is a factor which impedes sales. On the contrary, a better guarantee for the goods sold is a not inconsiderable selling point. The Commission concludes therefore that the inability on the part of the vendor to exempt himself from liability is not intended to impede intra-Community trade, nor does it have such an effect.

18.The Commission observes that it appears from the question referred to the Court that the alleged barrier to expons consists of a provision of national law or in the case-law relating thereto.

However, Articles 85 and 86 of the EEC Treaty concern only conduct of under-takings whose aim or effect is to impede trade between Member States. Moreover, it does not appear from the main proceedings that Anicie 1643 of the French Civil Code, or the case-law relating thereto, has the result of depriving provisions of the Treaty of their effectiveness or of favouring the adoption of agreements, decisions or concerted practices contrary to Article 85 of the EEC Treaty within the meaning of the judgments in Case 311/85 VVR v Sociale Dienst van de Plaatselijke en Gewestelijke Overheidsdiensten [1987] ECR 3801 , and in Joined Cases 209/84 to 213/84 Ministère public v Asjes [1986] ECR 1425 .

19.The Commission maintains that those considerations are sufficient to preclude the applicability of Article 85 of the Treaty. Article 85 is a concrete expression of Article 3(f) of the Treaty, the sole purpose of which is to set out the means to be used in order to achieve the aims of the Community as they are defined in Article 2 of the Treaty. According to the Commission, if Articles 85 and 86 are not applicable, then Article 3(f) cannot take their place.

20.The Commission proposes that the Court should give the following reply to the question referred by the Tribunal de commerce, Paris:

‘Case-law under which a person selling goods by way of trade may not contractually exempt himself from liability vis-à-vis a buyer for latent defects in the goods sold is compatible with the provisions of Articles 2, 3(f), 34 and 85(1) of the Treaty establishing the European Economic Community.’

G. F. Mancini

Judge-Rapporteur

( *1 ) Language of the case: French.

JUDGMENT OF THE COURT (Second Chamber)

24 January 1991 ( *1 )

In Case C-339/89,

REFERENCE to the Court under Article 177 of the EEC Treaty by the Tribunal de commerce (Commercial Court, Paris) for a preliminary ruling in the proceedings pending before that court between

Alsthom Atlantique SA

and

Compagnie de construction mécanique Sulzer SA,

Union des assurances de Paris, party served with third-party notice,

on the interpretation of Articles 2, 3(f), 34 and 85 of the EEC Treaty,

THE COURT (Second Chamber)

composed of: T. F. O'Higgins, President of the Chamber, G. F. Mancini and F. A. Schockweiler, Judges,

Advocate General: W. Van Gerven

Registrar: J. A. Pompe, Deputy Registrar

after considering the observations submitted on behalf of:

—

Compagnie de construction mécanique Sulzer SA, by Michel Normand, of the Paris Bar,

—

Union des assurances de Paris, by Alain Tinayre, of the Paris Bar,

—

the Commission of the European Communities, by J. Currall, a member of its Legal Department, assisted by H. Lehman, a French civil servant placed at the disposal of the Commission's Legal Department, acting as Agents,

having regard to the Report for the Hearing,

after hearing oral argument on behalf of the Compagnie de construction mécanique Sulzer, represented by Mr Normand and Mr Holleaux, of the Paris Bar, the Union des assurances de Paris and the Commission at the hearing on 2 October 1990,

after hearing the Opinion of the Advocate General delivered at the sitting on 14 November 1990,

gives the following

Judgment

1By judgment of 10 May 1989, which was received at the Court Registry on 3 November 1989, the Tribunal de commerce, Paris, referred to the Court for a preliminary ruling under Article 177 of the EEC Treaty a question on the interpretation of Articles 2, 3(f), 34 and 85(1) of the EEC Treaty.

2Those questions were raised in a dispute between Alsthom Atlantique SA (hereinafter referred to as ‘Alsthom’) and Compagnie de construction mécanique Sulzer SA (hereinafter referred to as ‘Sulzer’), the latter serving third-party notice on the Union des assurances de Paris, in connection with the defective functioning of ships' engines supplied by Sulzer to Alsthom and fitted in two cruise vessels delivered to the Dutch company Holland and America Tours (‘hereinafter referred to as HAT’).

3One of the main issues which arose before the national court concerns Article 1643 of the French Civil Code, which is worded as follows:

‘The vendor shall be liable for any latent defects, even if he is unaware of those defects, unless he stipulates that he shall not be liable.’

4In its case-law the French Court of Cassation has interpreted that article as raising an irrebuttable presumption that a manufacturer or trader is aware of any defects in the goods sold which he can avoid only if the contract is concluded with a trader in the same specialized field.

5In the proceedings instituted before the national court by Alsthom for payment of the costs incurred to remedy the latent defects in the engines sold by Sulzer, the latter argues that there is no case-law similar to that of the French Court of Cassation in any other Member State and that such case-law may distort competition and hinder the free movement of goods.

6Taking the view that the dispute raised a number of questions concerning the interpretation of Articles 2, 3(f), 34 and 85(1) of the EEC Treaty, the Tribunal de commerce, Paris, decided to refer the following question to the Court for a preliminary ruling:

‘Are the provisions of Articles 2 and 3(f), read together with those of Articles 85(1) and 34, of the EEC Treaty to be interpreted as prohibiting the application of a Member State's case-law which, by not allowing persons selling goods by way of trade to prove that on the date on which the goods were delivered they were unaware of a defect in the goods, has the effect of preventing them from relying on Article 1643 of the French Civil Code, which allows them to limit their liability when unaware of the defect, in the same way as their competitors in the other Member States may do under the provisions of their own national law?’

7Reference is made to the Report for the Hearing for a fuller account of the facts of the case, the course of the procedure and the written observations submitted to the Court, which are mentioned or discussed hereinafter only in so far as is necessary for the reasoning of the Court.

8It should be borne in mind first of all that Article 2 of the Treaty describes the task of the European Economic Community. The aims laid down in that provision are concerned with the existence and functioning of the Community and are to be achieved through the establishment of the Common Market and the progressive approximation of the economic policies of Member States, which are also aims whose implementation is the essential object of the Treaty (see, to that effect, the judgment in Case 126/86 Giménez Zaerav Instituto Nacional de la Seguridad Social [1987] ECR 3697, at paragraph 10 ).

9Those aims, on which the establishment of the Community is based, and more particularly the aim of promoting a harmonious development of economic activities throughout the Community, cannot have the effect either of imposing legal obligations on the Member States or of conferring rights on individuals. It follows that the provisions of Article 2 of the Treaty cannot be relied upon by an individual before a national court.

10The institution of a system ensuring that competition in the Common Market is not distorted, as envisaged by Article 3(f) of the Treaty, is an objective specified more closely in several other provisions relating to the rules of competition (see to that effect in particular the judgments in Case 85/76 Hoffman-La Roche v Commission [1979] ECR 461 , and in Case 322/81 Michelin v Commission [1983] ECR 3461, at paragraph 29 ), including Article 85 of the Treaty, which prohibits agreements and concerted practices between undertakings which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the Common Market.

11It must be borne in mind that, as the Court has consistently held (see, in particular, the judgment in Case 311/85 Vereniging van Vlaamse Reishureaus v Sociale Dienst van de Plaatselijke en Gewestelijke Overheidsdiensten [1987] ECR 3801, at paragraph 10 ), Articles 85 and 86 of the Treaty concern the conduct of undertakings and not measures adopted by the authorities of the Member States. Nevertheless the Treaty imposes a duty on Member States not to adopt or maintain in force any measure which could deprive those provisions of their effectiveness. That would be the case, in particular, if national case-law were to favour the adoption of agreements, decisions or concerted practices contrary to Article 85 of the Treaty or to reinforce their effects.

12With regard to this case, it must be stated that the irrebuttable presumption that a trader is aware of any defects in the goods sold, to which the national court refers, has been developed in the case-law for reasons connected with the protection of buyers and is unlikely to favour or facilitate the adoption of agreements contrary to Article 85.

13According to Article 34 of the Treaty, quantitative restrictions on exports and all measures having equivalent effect are prohibited between Member States.

14As the Court has consistently held (see, most recently, the judgment in Case C-9/89 Spain v Council [1990] ECR 1383, at paragraph 21 ), Article 34 of the Treaty concerns only those measures which have as their specific object or effect the restriction of patterns of exports and thereby the establishment of a difference in treatment between the domestic trade of a Member State and its export trade in such a way as to provide a particular advantage for national production or for its domestic market at the expense of the production or of the trade of other Member States.

15It must be held that the case-law of the French Court of Cassation, to which reference is made in this case, applies without distinction to all commercial relations governed by French law and does not have as its specific object or effect the restriction of patterns of exports thereby favouring domestic production or the domestic market. Furthermore, the parties to an international contract of sale are generally free to determine the law applicable to their contractual relations and can thus avoid being subject to French law.

16In the light of all those considerations, the answer to the question submitted for a preliminary ruling must be that the provisions of Articles 2 and 3(f) of the EEC Treaty, read together with those of Articles 34 and 85(1) thereof, must be interpreted as meaning that they do not prohibit the application of a Member State's case-law which, by not allowing persons selling goods by way of trade to prove that on the date on which the goods were delivered they were unaware of a defect in the goods, has the effect of preventing them from relying on provisions of national legislation which allow them to limit their liability when unaware of the defect, in the same way as their competitors in the other Member States may do.

Costs

17The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. Since these proceedings are, in so far as the parties to the main proceedings are concerned, in the nature of a step in the proceedings pending before the national court, the decision on costs is a matter for that court.

On those grounds,

THE COURT (Second Chamber),

in answer to the question referred to it by the Tribunal de commerce, Paris, by judgment of 10 May 1989, hereby rules:

The provisions of Articles 2 and 3(f) of the EEC Treaty, read together with those of Articles 34 and 85(1) thereof, must be interpreted as meaning that they do not prohibit the application of a Member State's case-law which, by not allowing persons selling goods by way of trade to prove that on the date on which the goods were delivered they were unaware of a defect in the goods, has the effect of preventing them from relying on provisions of national legislation which allow them to limit their liability when unaware of the defect, in the same way as their competitors in the other Member States may do.

O'Higgins

Mancini

Schockweiler

Delivered in open court in Luxembourg on 24 January 1991.

J.-G. Giraud

Registrar

T. F. O'Higgins

President of the Second Chamber

( *1 ) Language of the case: French.