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The Position of the Assignee in the Law on Export Refunds – The Grant and Revocation of Export Refunds and Legality of Sanctions

by Dr. Nils Harnischmacher 

I. The Problem and Approach to the Investigation
Compared to other market products in the European Community, agricultural produce displays a number of peculiarities. For instance, some produce can only be harvested at certain times of the year. The yield may also be closely connected to the local conditions relating to soil and climate. Owing to such peculiarities there may be fluctuations in the quantity harvested that, in turn, causes price fluctuations and thereby instability on agricultural markets. In order to stabilize these markets, the agricultural policy of the Community provides in for the creation of European market regimes that each regulate the market for individual agricultural produce (Art. 34 (1) EC Treaty).

These market regimes provide for a Community market price that, as a rule, is higher than that found on the global market. The low price on the global market means that there is no real incentive for exporters to sell Community produce on the global market that they had previously acquired at a high price on the EC internal market. Export refunds offer one incentive for traders to sell their goods on the global market. They are, in effect, compensation payments made to exporters of Community produce and are financed by the Community budget. Export refunds serve to compensate the difference in prices charged on the global market and the internal market of the EC. The aim of export refunds is to deplete excess production and allow Community produce to be exported.

The fact that export refunds are only paid once the goods have left the Community means that exporters face a temporary lack of finance. In order to avoid this situation, exporters assign their claims to export refunds to third parties (i.e. banks) in order to pre-finance the export.
The assignment of claims to export refunds as well as the granting and revocation of export refunds to the assignee raise all manner of legal questions owing to the mixture of Community and national law that regulates this area. The dissertation examines this aspect as well the question as to whether it is lawful to impose sanctions on the assignee.

II. Results of the investigation
The investigation shows that the system of export refunds raises a number of interesting legal questions that, quite apart from their practical implications, also raise fundamental questions relating to legal science.

The analysis of the assignment of a claim to export refunds as well as the grant and revocation of refunds in relation to the assignee, has demonstrated that the law on export refunds constitutes a multi-layered legal system involving a complex interplay of legal sources in Community and national law. In this respect, Community law may take precedence over national law but, at the same time, the two sources are closely interrelated.

The interrelationship between Community and national law becomes clear when the claim for export refunds is assigned. Although Community law does not regulate the assignment of the claim to export refunds, it does determine how national rules on assignment contained in §§ 398 ff. BGB are to be applied.

The decision to revoke the grant of export refunds is not regulated by Community law either. Instead, national law (i.e. § 10 of the Gesetz zur Durchführung der Gemeinsamen Marktorganisationen und der Direktzahlungen (Act to Implement the Common Market Organization and Direct Payments (hereinafter “MOG”)) is to be used as the basis for a claim for recovery. Despite the applicability of § 10 MOG, the national legal provisions of § 48 (2) and (4) of the Verwaltungsverfahrensgesetz (Administrative Procedures Act (“VwVfG”)) cannot be invoked to protect legitimate expectations because they are overruled by applicable Community law in this area (i.e. Art. 52 (4) Reg. (EC) No. 800/99).
The basis of authority for the recovery of export refunds as well as the regulations protecting legitimate expectations in this respect are regulated at Community level by Art. 52 (1) and (4) Reg. (EC) No. 800/99. The provisions make the assignee and exporter jointly liable for the repayment of export refunds although this is governed by national law (§§ 421 ff. BGB) owing to the statutory arrangements under Community law.

The interpretation of Art. 52 Reg. (EC) No. 800/99 allows the sanction contained in Art. 51 Reg. (EC) No. 800/99 to be imposed on the assignee. It has also been established that the sanction is punitive in nature (i.e. criminal law in the broad sense).
The investigation into the legality of the sanction has revealed that there is no interrelationship between Community and national law. As a result, this question can only be answered on the basis of Community law.

As a result, the Community has the authority to impose punitive sanctions (criminal law in the broad sense) in relation to export refunds. Articles 34 (2) (1) and 37 (2) (3) EC Treaty state that the Community is has the power to issue all “necessary measures” and do not require a restrictive interpretation according the Community legal principles of either “nullum crimen sine lege” or “nullum crimen sine lege parlamentaria“.

The investigation has also established that the authority of the Community to impose punitive sanctions (criminal law in the broad sense) in relation to export refunds has been effectively delegated to the Commission.

That said, the imposition of the sanction on the assignee breaches higher-ranking Community law. The author has argued that there is an infringement against the Community legal principles of “nulla poena sine culpa” and proportionality as well as the assignee’s general freedom to act, which constitutes a fundamental Community right.

Concerning the legal consequences of this infringement against higher-ranking Community law, the question concerning the applicable doctrine of the (improper) exercise of discretion requires a reconsideration of the relationship between Community and national law. As a result, the discretion exercised by the Hamburg Main Customs Office is limited to an action against the exporter alone. By contrast, there will be an improper exercise of discretion if the sanction is imposed on the assignee.

This finding has far-reaching practical consequences and effects on the imposition of sanctions in relation to export refunds. Assignees can always appeal against the imposition of sanctions by arguing that it contravenes Community law and constitutes an improper exercise of discretion.


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