Belgian challenge to Rioja dismissed

<>In May, the European Court of Justice gave a ruling in a case involving unusual procedure under article 227 (ex article 170) of a challenge by one Member State against another Member State, alleging breach of Community law.  This type of procedure is extremely rare as, in the normal course of events, the Commission acts on behalf of the Community in raising infringement proceedings in the ECJ.  In this case, (Belgium v Spain C-388/95) the Belgian state took action after the Commission refused to pursue Spain for an alleged breach of Community rules in relation to restrictions on exports.  Belgium contested the right of Spanish authorities to restrict the use of the name “Rioja” to wine which had been bottled in approved cellars in the Spanish region of La Rioja.

One of the basic principles of Community law since its outset has been that of the free movement of goods, which has been of fundamental importance in the move towards the creation of the single market.  Community rules thus prohibit restrictions on trade, whether direct or indirect, as distorting the market and shackling consumer choice.  Article 28 (ex Article 30) of the Treaty outlaws quantitative restrictions on imports and all measures having equivalent effect to such restrictions and article 29 (ex Article 34) of the Treat contains the analogous rules in relation to exports.  The Belgium v Spain case was raised under the then article 34.

IN this case, Belgium contested the right of Spanish authorities to require that wine bearing the name “Rioja” be bottled in authorised cellars in the Rioja region of Spain in order to qualify for the “controlled designation of origin” (denominaciòn de origen calificada).  Belgium (which was supported in its arguments by the Netherlands, the UK, Finland and Denmark) argued that the case of Delhaize (C-47/90) – which also originated in Belgium and related to the export of Rioja wine – outlawed the rules made by Spain in relation to the “controlled designation of origin”.  In the Delhaize case, the ECJ was asked, following re quest for a preliminary ruling from a Belgian court, to rule on Spanish provisions applicable to wine of designated origin which limited the quantity of wine that might be exported in bulk.  The rules, however, did not otherwise restrict the sale of wine in bulk within the region of production.  The Court’s decision was that these rules did constitute measures having an equivalent effect to quantitative restrictions on exports, and were thus illegal.

Spain, on the other hand, (backed up by Portugal and Italy) contended that the Delhaize judgment did not affect the conditions it applied to the controlled designation of origin, arguing that other Member States had adopted similar provisions.  Furthermore, it claimed that the rules at issue did not restrict the export of wine in bulk but were simply designed to protect the designation of origin and thus the quality of the wine.  Exporting the wine in barrels, it claimed, would have an adverse effect on the quality of the wine.

On considering the conditions imposed by the Spanish authorities, the Court noted that the rules would allow wine transported in bulk within the Rioja region to be described as Rioja wine where it was bottled in authorised cellars.  Thus, the rule constituted an impediment to the free movement of goods and would be illegal if there were no objective justification for the rule.  The Spanish government’s argument on this point was that there was a need to protect the Rioja controlled designation of origin by safeguarding the wine’s particular characteristics, its quality and the guarantee of its origin.  Transporting the wine in bulk could in itself damage the wine and where it was transported out of the region for bottling this would have the additional disadvantage that bottling could be carried out by people lacking the expertise in dealing with that particular wine.  The condition imposed regarding the place that bottling took place was therefore justified, it argued.

The Court observed that Community legislation displayed a general tendency to enhance the quality of products through the use of, inter alia, to designations of origin.  Such designations often enjoyed a high reputation amongst consumers and were an essential means for producers of attracting custom and this was particularly the case in relation to quality wines.  Efforts had to be made in order for their quality and particular characteristics to be maintained.  By ensuring that winegrowers in the region of La Rioja controlled bottling, the Spanish rules aimed to safeguard the quality and reputation of Rioja wine.

Against that background, the Spanish rules were, in the Court’s view, to be regarded as compatible with Community law despite their restrictive effects on trade.  However, this was conditional on the restrictions constituting a necessary and proportionate means of upholding the great reputation enjoyed by the Rioja controlled designation of origin.

In order to determine whether that was the case, the Court observed, firstly, that the bottling of wine constituted an important operation which, if not carried out in accordance with strict requirements, could seriously harm the quality of the finished product.  The best conditions were more certain to be assured if bottling operations were carried out by undertakings established in the region of origin by those entitled to use the designation of origin, since they had specialised experience and detailed knowledge of the specific characteristics of the wine in question.

It was noted that bulk transport of wine could also seriously impair its quality if it was not carried out under best possible conditions.  Controls undertaken outside the region of production in accordance with Community rules were not systematic and consequently were less able to guarantee the quality and authenticity of the wine than those carried out in the region (the Spanish rules provided for every consignment to be carefully examined).

From these findings, the Court inferred that the risk to which the quality of the wine finally offered to consumers was exposed was greater where it had been carried and bottled outside the region of production than when it had been bottled within the region.  Accordingly, the Court concluded that the Spanish rules, which aimed to preserve the considerable reputation enjoyed by Rioja wine, were justified as a measure protecting the controlled designation of origin.

This case was concerned with wine and, more specifically, the regime of “controlled designation of origin”.  However, the findings of the Court in relation to the protection of the quality and reputation of a product by rules which would otherwise be struck down by Community law has a wider significance for non-wine industries which protect products of high reputation in this way.