Claims for Damages against the Community in External Trade Cases

The proceedings were enforced by banana producers and distributors from outside the Community, affected by the 1999 Commission Regulation on the Community banana market (hereinafter the “1999 Regulation”) which substantially changed the allocation of tariff quotas between relevant third countries to the detriment of traditional banana exporters, including the Chiquita group consisting of some of the largest banana producers and traders in the world.

The 1999 Regulation was related to a long-standing international trade dispute settled eventually within the WTO framework whereby it was decided that the Community system of tariff quotas for bananas is inconsistent with GATT agreements. However, the 1999 Regulation was likewise challenged before the WTO and was eventually found to be in breach of WTO international trade rules. Nevertheless, the European Commission refused to bring Community regulations on banana tariff quotas in line with the report of the WTO panel.

Affected third country exporters argued that in doing so the European Commission had seriously breached obligations incumbent upon the Community and claimed over EUR 560 million in damages from the Community.

The claim was based on Article 288 of the EC Treaty under which, in the case of non-contractual liability, the Community shall, in accordance with the general principles common to the laws of the Member States, make good any damage caused by its institutions or by its servants in the performance of their duties.

The Court of First Instance (hereinafter the “CFI”) decided that non-contractual liability of the Communities under Article 288 of the EC Treaty will apply when it is established that (i) the conduct of Community institutions involved was unlawful, (ii) the claimant suffered actual damage and (iii) sufficient causal link exists between the conduct and the damage. When any of these conditions is not met, the claim for damages from the Community should be rejected as unfounded without there being a need to review fulfilment of the remaining premises.

The CFI explained that, in general, Community institutions may be held liable for unlawful conduct where they seriously breached a provision of law designed to confer rights upon individuals.

The CFI described the serious breach of law as, in particular, manifest and grave infringement by an institution of the Community of the limits of discretion it enjoys within a specific area. When a Community institution has no discretion in handling specific matters, or such discretion is substantially limited, a merely ordinary breach of law would possibly be recognized as serious and thus give rise to compensatory claims. In the present case, however, the CFI did not find the conduct of the European Commission related to the issue of the regulation on banana markets unlawful.

In that regard, the CFI reiterated its established position that individuals would be able to rely on WTO provisions vis-à-vis Community institutions only if the Community measure whose legality is challenged was adopted specifically for the purpose of implementing a particular obligation assumed in the context of the WTO Agreements into Community law. As these conditions were not, according to the CFI, met in the present case, the compensatory claim was dismissed.