Kakavetsos-Fragkopoulos (anciennement K. Fragkopoulos kai SIA) (Free movement of goods) [2011] EUECJ C-161/09 (03 March 2011)

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(Free movement of goods – Measures having an effect equivalent to quantitative restrictions – Currants – National legislation aimed at protecting the quality of the product – Restrictions imposed on marketing according to different areas of production – Justification – Proportionality)

Kakavetsos-Fragkopoulos AE Epexergasias kai Emporias Stafidas, formerly K. Fragkopoulos kai SIA OE,

1 This reference for a preliminary ruling concerns the interpretation of Article 29 EC.

2 The reference was made in proceedings between K. Fragkopoulos kai SIA OE, a Greek undertaking and predecessor in title of Kakavetsos-Fragkopoulos AE Epexergasias kai Emporias Stafidas (‘Fragkopoulos’), and the Nomarchiaki Aftodioikisi Korinthias (the Prefectural Authority of Corinthia) concerning the latter’s refusal to authorise Fragkopoulos to transport, store, process and pack – for onward export – currants in bulk from a geographical area other than that in which that undertaking is established.

3 Article 1 of Council Regulation (EC) No 2201/96 of 28 October 1996 on the common organisation of the markets in processed fruit and vegetable products (OJ 1996 L 297, p. 29) provides that the common organisation of the markets which it establishes covers, inter alia, dried grapes (Code NC 0806 20).

4 Commission Regulation (EC) No 1549/98 of 17 July 1998 supplementing the Annex to Regulation (EC) No 1107/96 on the registration of geographical indications and designations of origin under the procedure laid down in Article 17 of Council Regulation (EEC) No 2081/92 (OJ 1998 L 202, p. 25) registers inter alia the protected designation of origin (‘PDO’) Κορινθιακή Σταφίδα �'οστίτσα (Korinthiaki Stafida Vostitsa) under the heading ‘Products intended for human consumption listed in Annex II to the Treaty’.

5 Article 1 of Law 553/1977 on measures to protect and support exports of currants and other related questions (FEK A’ 73) provides as follows:

8 According to the Simvoulio tis Epikratias (Council of State), it is apparent from the statement of reasons for Law 553/1977 that the reason why the dry grape-producing regions are divided into area A and area B is because the dried grapes cultivated in area A are considered to be of superior quality to those grown in area B. Area A is itself divided into two sub'areas, the first of which produces dried grapes of a higher quality. As regards the conditions under which dried grapes may be transported between areas A and B, it is also apparent from the statement of reasons for Law 553/1977 that, in order to improve the quality of dried grapes from area B, dried grapes from area A may be brought into that area and mixed with dried grapes which are cultivated there. Moreover, the different labels referred to in Article 2 of Law 553/1997 were considered essential for ensuring the protection of the superior quality of the dried grapes originating from area A, informing consumers of the origin of the products, highlighting the areas in which the dried grapes were cultivated or packed and, lastly, indirectly raising the profile of the work of dried grape producers.

9 By decree of 22 November 1993, the Ypourgos Georgias (Ministry of Agriculture) accorded recognition to the name ‘Vostizza’ as a PDO for currants produced from grapes of the ‘Black Corinth’ variety originating from the Sub'prefecture of Aigialeia and the former municipalities of Erineo, Drathida and Felloï in the Prefecture of Achaea (first sub'area of area A). Moreover, since 2008, dry grapes originating from the island of Zante, which is one of the regions in Area B, have benefited from the PDO Σταφίδα Ζακύνθου (Stafida Zakynthou).

The dispute in the main proceedings and the questions referred for a preliminary ruling

10 It is apparent from the order for reference that Fragkopoulos, which is engaged in processing and marketing currants, has a dried grape processing and packing plant in the region of Kiato (Corinthia). That region is in the second sub'area of area A, which produces dried grapes of the ‘Korfos’ variety, which are not covered by the national and Community PDO enjoyed only by the ‘Vositzza’ variety at the material time.

11 In order to be able to transport, store, process and pack in the Prefecture of Corinthia dry grapes from the other parts of area A and from area B with a view to marketing them – including in other Member States – Fragkopoulos applied to the Nomarchiaki Aftodioikisi Korinthias for authorisation.

12 On 27 June 2001, the Nomarchiaki Aftodioikisi Korinthias rejected that request on the basis of Law 553/1977.

13 Taking the view that the national legislation applicable was contrary to European Union law, Fragkopoulos then brought an action on 17 September 2001 before the Simvoulio tis Epikratias for annulment of that decision. Before that court, the Ypourgos Georgias and the Enosis Agrotikon Synaiterismon Aigialeias tou Nomou Achaïas (Union of Agricultural Cooperatives of the Prefecture of Achaea) intervened in the proceedings, arguing that the contested decision was lawful.

14 In support of its action, Fragkopoulos claims that the requirement under Article 1 of Law 553/1977 for processing undertakings established in currant'producing area A to use as raw material only dried grapes from the part of Area A in which they are established – the corollary of which is that those undertakings are prohibited from bringing in dried grapes from both the other parts of area A and the whole of area B – goes beyond what is necessary to attain the objective of protecting the quality and reputation of the ‘Vostizza’ variety of dried grape. That requirement therefore contravenes European Union law, in particular the principles of the free movement of goods and non'discrimination.

15 Fragkopoulos submits inter alia in that regard that its economic freedom and freedom to compete are affected by the Greek legislation at issue, the effect of which is that, since processing undertakings established in area A, such as itself, do not have sufficient raw material, they are under'utilised, whereas firms established in area B can buy dried grapes from both areas A and B and thus have plentiful raw material at their disposal and can produce more at lower cost.

16 It adds that total production of dried grapes in the region of the Prefecture of Corinthia is 9 000 tonnes, which is processed by five undertakings established and operating in that prefecture, whereas in Area B, which produces 20 000 tonnes of dried grapes, there are four active units, with the effect that Fragkopoulos is in economic decline.

17 Fragkopoulos also states that, by its application, it is not seeking authorisation to mix different varieties of dried grapes in its factory any more than it intends to affect the quality consistency of or exploit the ‘Vostizza’ PDO, but is simply seeking the right to bring in dried grapes from regions other than Corinthia, process them and then export them, labelling the packaging concerned in the manner required under Article 2 of Law 553/1977 according to each individual currant variety.

18 The Simvoulio tis Epikratias questions, first, whether it is possible for Fragkopoulos to rely before a national court on a provision such as Article 29 EC in a case in which the restrictions at issue relate to territory within one and the same Member State and are, formally speaking, neutral in terms of intra'Community trade. However, it points out in that connection that the effect of Law 553/1977 is that Fragkopoulos is prohibited from bringing into the region in which it is established dried grapes from other regions of the Hellenic Republic for the purpose of not only processing and packing them but also exporting them to other Member States.

19 Second, in the event that the Court should answer that question in the affirmative, the Simvoulio tis Epikratias states that, even if, formally speaking, the national provisions at issue do not distinguish between domestic trade and export trade, they nevertheless have the effect of restricting, albeit only potentially, the flow of exports to other Member States. It therefore asks whether the provisions of Law 553/1977 are, as a matter of principle, contrary to Article 29 EC and, if so, whether they may be justified under Article 30 EC and whether those provisions are proportionate.

20 Those are the circumstances in which the Simvoulio tis Epikratias decided to stay the proceedings and to refer the following questions to the Court for a preliminary ruling:

21 By its questions, which it is appropriate to consider together, the Simvoulio tis Epikratias asks, in essence, whether and, if so, to what extent Article 29 EC precludes national legislation such as that at issue in the main proceedings which, on the one hand, prohibits dried grapes from being brought from different areas of the Member State concerned, for the purpose of storage, processing and packing for export, to a specific area of that State in which it is permitted to store, process and pack only locally grown grapes and, on the other hand, reserves the possibility of recognising the ‘Vostizza’ PDO solely for dried grapes which have been processed and packed in the area in which they were cultivated.

22 As a preliminary point, it should be borne in mind that Article 29 EC provides that quantitative restrictions on exports and all measures having equivalent effect are prohibited between Member States. It is established case'law that that provision is recognised as having direct effect and, therefore, conferring rights on individuals which the national courts must protect (see, to that effect, Case 83/78 Redmond [1978] ECR 2347, paragraphs 66 and 67, and Case C-47/90 Delhaize and Le Lion [1992] ECR I-3669, paragraph 28).

23 Consequently, an undertaking in a situation such as that of Fragkopoulos whose business entails processing and packing dried grapes for export to other Member States, which is established in a particular area of a Member State and is prohibited under national law from bringing into that area all varieties of dried grapes from other areas of that State for the purpose of processing and packing them, so that it is impossible for it to export dried grapes originating from those areas, can legitimately rely on Article 29 EC before a national court.

24 As regards the scope of Article 29 EC, it is necessary to establish, in succession, whether national legislation such as that at issue in the main proceedings constitutes a restriction on the fundamental principle of free movement of goods and, if so, whether it can be objectively justified.

25 It is necessary, first, to ascertain whether national legislation of the kind at issue in the main proceedings constitutes a quantitative restriction on exports or a measure having equivalent effect to such a restriction within the meaning of Article 29 EC.

26 Since the legislation at issue in the main proceedings does not directly impose quantitative restrictions on exports, it cannot, as such, be regarded as constituting a quantitative restriction on exports within the meaning of Article 29 EC.

27 As regards whether the legislation in question has the characteristics of a measure having equivalent effect to a quantitative restriction on exports within the meaning of that provision, it should be noted that, as is apparent from Article 1 of Regulation No 2201/96, dried grapes are covered by the common organisation of the markets provided for in Article 34 EC. It should be added that, as is apparent from the Court’s case'law, in such a case any measure likely to impede, directly or indirectly, actually or potentially, intra-Community trade constitutes a measure having equivalent effect to a quantitative restriction on exports (see, inter alia, Case 94/79 Vriend [1980] ECR 327, paragraph 8, and Case C-272/95 Deutsches Milch'Kontor [1997] ECR I-1905, paragraph 24).

28 It is clear that, in that it prohibits an economic operator such as Fragkopoulos from obtaining supplies of dried grapes from national geographical areas other than that in which that operator is established – in this case, from the first sub'area of area A and the whole of area B – national legislation such as that at issue in the main proceedings undoubtedly has an impact on that operator’s volume of exports, given that the operator concerned can process and pack only dried grapes cultivated in the area in which it is itself established – that is, the second sub'area of area A (see, to that effect, also Case C-293/02 Jersey Produce Marketing Organisation [2005] ECR I-9543, paragraph 80).

29 It follows that such national legislation is likely to hamper, at the very least potentially, intra'Community trade and therefore constitutes a measure having equivalent effect to a quantitative restriction on exports, which is, in principle, prohibited by Article 29 EC. In the present case, that applies a fortiori since Article 1(2) and (4) of Law 553/1977 expressly prohibits the exports of currants if they do not comply with the conditions laid down in that law stipulating that they are to be processed, stored and packed in the same place as that in which they were cultivated.

30 Moreover, with regard to the fact that the ‘Vostizza’ PDO is reserved solely for dried grapes processed and packed in the same area in which that grape has been cultivated, it need merely be observed that, according to settled case'law, where the use of a PDO registered at European Union level is made subject to conditions connected with the region of production, that also constitutes a measure having equivalent effect to a quantitative restriction on exports within the meaning of Article 29 EC (see, to that effect, inter alia Case C-469/00 Ravil [2003] ECR I-5053, paragraph 88, and Case C-108/01 Consorzio del Prosciutto di Parma and Salumificio S. Rita [2003] ECR I-5121, paragraph 59).

31 In those circumstances, it is necessary, second, to ascertain whether such restrictions on the free movement of goods can be objectively justified.

32 Since only dried grapes cultivated in the first sub-area of area A, namely those of the ‘Vostizza’ variety, are covered by a PDO, a distinction must be made, as regards any justification for the national legislation at issue, between, on the one hand, the prohibition on any movement of dried grapes between the two sub'areas of area A and, on the other, the prohibition on bringing dried grapes originating from area B into the second sub'area of area A, in which Fragkopoulos has its seat and which has not been accorded recognition as a PDO.

The prohibition on any movement of dried grapes between the two sub'areas of area A

33 As regards the first prohibition referred to in the above paragraph, it is apparent from the documents before the Court that the purpose of the requirement to process and pack dried grapes of the ‘Vostizza’ variety only in the first sub'area of area A and the concomitant prohibition laid down in Article 1(4) of Law 553/1977 on any movement of dried grapes between the two sub'areas of area A, the effect of which is that it is impossible for a producer established in the second sub'area of area A to process and pack dried grapes of the ‘Vostizza’ variety, is to protect the PDO from which that variety benefits under European Union law.

34 It should be noted in that regard that European Union legislation displays a general tendency to enhance the quality of products within the framework of the common agricultural policy, in order to promote the reputation of those products through, inter alia, the use of designations of origin which enjoy special protection (Case C-388/95 Belgium v Spain [2000] ECR I-3123, paragraph 53). That tendency manifested itself in the adoption of Council Regulation (EEC) No 2081/92 of 14 July 1992 on the protection of geographical indications and designations of origin for agricultural products and foodstuffs (OJ 1992 L 208, p. 1), which, according to its preamble, is intended, inter alia, to meet consumers’ expectations as regards products of quality and an identifiable geographical origin and to enable producers, in conditions of fair competition, to secure higher incomes in return for a genuine effort to improve quality (see Ravil, paragraph 48, and Consorzio del Prosciutto di Parma and Salumificio S. Rita, paragraph 63).

35 The applicable rules protect those entitled to use them against improper use of designations of origin by third parties seeking to profit from the reputation which they have acquired. Such designations are intended to guarantee that the product bearing them comes from a specified geographical area and displays certain particular characteristics. They may enjoy a high reputation amongst consumers and constitute for producers who fulfil the conditions for using them an essential means of attracting custom. The reputation of designations of origin depends on their image in the minds of consumers. That image in turn depends essentially on particular characteristics and more generally on the quality of the product (see Belgium v Spain, paragraphs 54 to 56). For consumers, the link between the reputation of the producers and the quality of the products also depends on his being assured that products sold under the designation of origin are authentic (see Ravil, paragraph 49, and Consorzio del Prosciutto di Parma and Salumificio S. Rita, paragraph 64).

36 Under Article 30 EC, Article 29 EC does not preclude prohibitions or restrictions on exports justified, inter alia, on grounds of the protection of industrial and commercial property.

37 Since there is no doubt that designations of origin fall within the scope of industrial and commercial property rights for the purpose of Article 30 EC, a condition such as that at issue in the main proceedings, which prohibits any movement of dried grapes between the two sub'areas of area A, must be regarded as compatible with European Union law, despite its restrictive effects on trade, provided that it is shown that it is necessary and proportionate and capable of upholding the reputation of the PDO ‘Κορινθιακή Σταφίδα �'οστίτσα (Korinthiaki Stafida Vostitsa)’ (see, to that effect, Belgium v Spain, paragraphs 58 and 59, and Consorzio del Prosciutto di Parma and Salumificio S. Rita, paragraph 66).

38 However, while a measure of that type is undoubtedly appropriate to protect the PDO of dried grapes of the ‘Vostizza’ variety, it is not sufficient for the purpose of concluding that it is justified, contrary to what is claimed by the referring court, to establish that no other measure is likely to be as effective as an absolute prohibition on movement of dried grapes between the two sub'areas of area A.

39 On the contrary, in determining whether the restriction at issue is proportionate, it is also important to ascertain whether the measures implemented in that context go beyond what is necessary to attain the legitimate objective being pursued. In other words, it is necessary to determine whether there exist alternative measures that are also capable of attaining that objective while at the same time having a less restrictive effect on intra'Community trade.

40 It should be noted that, as the Netherlands Government submitted in its written observations and the Advocate General pointed out at point 77 of his Opinion, it is quite possible to envisage a solution less restrictive of the free movement of goods, such as that requiring producers to have separate production lines, or even separate warehouses, in which only dried grapes of the same geographical origin can be stored, processed and packed.

41 Fragkopoulos also emphasised that its request, from which the action in the main proceedings sprang, is not in any way directed at obtaining authorisation to mix different varieties of dried grapes. Furthermore, Fragkopoulos stated at the hearing that there are fewer than 10 producers of dried grapes established in the two sub'areas of area A, so that, as stated by the Advocate General at point 78 of his Opinion, spot checks at the respective production sites could easily be set up. Since the mixing of different varieties of dried grapes is permitted in area B, such checks would need to be carried out only within area A.

42 Moreover, it should be borne in mind in that context that a restrictive measure may be regarded as complying with the requirements of European Union law only if it genuinely reflects a concern to secure the attainment of the objective pursued in a consistent and systematic manner.

43 It is apparent that no provision was made in Law 553/1977, with regard to dried grapes of the ‘Vostizza’ variety with a PDO, for a specification of the type provided for in the national legislation at issue in the cases which gave rise to the judgments in Ravil and Consorzio del Prosciutto di Parma and Salumificio S. Rita. In the absence of objective criteria identified in advance, such as the detailed description of the protected product and its main characteristics, the factors which prove that the product concerned originates from a particular geographical area, the description of the production method, which may be local, for the product, as well as the requirements to be met to be entitled to use the PDO, it is in any event difficult to guarantee the high quality claimed for the product which the PDO is supposed to protect.

44 Moreover, it should be observed that the national legislation at issue in the main proceedings establishes different rules for the different dried grape'producing areas.

45 Accordingly, it is accepted that producers in area B are permitted to process, store, pack and export dried grapes from the whole of area A, including the first sub'area of area A, in which the ‘Vostizza’ variety is grown. The only requirement under Greek legislation is to distinguish in an appropriate manner mixtures of dried grapes having such different origins, in this case by means of a label indicating that the dried grapes are a mixture of grapes from areas A and B. The Greek legislature therefore seems to have taken the view that it is perfectly legitimate for operators established in an area in which dried grapes of considerably lower quality are produced to process higher quality dried grapes cultivated in another geographical area, including the area which has a PDO, so long as they comply with a simple labelling requirement to avoid consumers being misled.

46 As the Advocate General pointed out at point 75 of his Opinion, there is no obvious reason why a similar practice could not be implemented between the two sub'areas of area A. In other words, it is not clear why a much more restrictive measure is imposed on producers in the second sub'area of area A, in that they are quite simply prohibited from processing dried grapes from the first sub'area of area A in which the ‘Vostizza’ variety is grown.

47 Fragkopoulos also stated, without being contradicted on this point, that the purpose of its request was not to take unfair advantage of the PDO reserved for dried grapes grown in the first sub'area of area A and that it was willing to label its products in such a way as to make clear the respective geographical origins of the dried grapes concerned.

48 Moreover, the system as currently operated in Greece appears to be even more problematic in terms of its consistency because, during 2008, dried grapes from the island of Zante, that is, an area forming part of area B in which the dried grapes are unquestionably of inferior quality, were granted PDO status, whereas dried grapes from the second sub'area of Area A, which are of a relatively superior quality, are still not protected.

49 In those circumstances, it must be held that an absolute prohibition on movement of dried grapes between the two sub'areas of area A, such as that imposed in the legislation at issue in the main proceedings, cannot be regarded as objectively justified on grounds of the protection of industrial and commercial property for the purpose of Article 30 EC, since it does not pursue that objective consistently and does not comply with the requirements of the principle of proportionality.

The prohibition on bringing products from area B into the second sub'area of area A

50 As regards the second prohibition referred to in paragraph 32 above, namely the prohibition on bringing dried grapes from area B into the second sub'area of area A, as provided for in Article 1(2) of Law 553/1977, it should be recalled that dried grapes of the ‘Korfos’ variety, which are cultivated in that second sub'area in which Fragkopoulos is established, are not covered by the PDO from which dried grapes of the ‘Vostizza’ variety grown in the first sub'area of area A benefit. It follows that the prohibition on bringing dried grapes from area B into the second sub'area of area A cannot be justified by the need to protect that PDO.

51 However, it is established case'law that a national measure having equivalent effect to a quantitative restriction on exports, which is in principle contrary to Article 29 EC, may be justified not only on one of the grounds stated in Article 30 EC but also by overriding requirements of public interest, provided that the measure is proportionate to the legitimate objective pursued (see, inter alia, Case C-205/07 Gysbrechts and Santurel Inter [2008] ECR I-9947, paragraph 45).

52 It is therefore necessary to determine in this case whether, in a situation where no PDO has been registered at European Union level for dried grapes cultivated in the second sub'area of area A, namely those of the ‘Korfos’ variety, one of the grounds of justification referred to in Article 30 EC or an overriding requirement of public interest may legitimately be relied on.

53 First, the Greek Government submits that the objective of the legislation at issue in the main proceedings is to prevent different varieties of dried grapes from being mixed, in order to protect the quality of dried grapes grown in area A, which are deemed to be of superior quality to those grown in area B.

54 However, it should be borne in mind that a national measure which restricts the free movement of goods may not be justified solely on the ground that it aims to protect within the Member State concerned the purported quality of a product unless that product has a PDO (see, to that effect, Joined Cases C-158/04 and C-159/04 Alfa Vita Vassilopoulos and Carrefour-Marinopoulos [2006] ECR I-8135, paragraph 23).

55 As the Advocate General stated at point 66 of his Opinion, it would be contrary to the spirit of the Treaty provisions on the free movement of goods for Member States to set up insuperable internal borders within their territory in order to protect the purported superior quality of certain products, especially since European Union law provides the mechanisms necessary for protecting the quality of products with characteristics which merit special protection (see, to that effect, also paragraphs 34 et seq. above).

56 Second, the Simvoulio tis Epikratias states in its order for reference that dried grapes from Area A enjoy a particular reputation and esteem among Greek consumers. On the basis of that assessment, it seems to accept that the justification for the national legislation at issue is the need to protect consumers by seeking to prevent opportunities for fraud that would arise if different varieties of dried grapes were mixed.

57 It should be noted in that regard, as is already apparent from paragraphs 43 et seq. above, that the national legislation at issue in the main proceedings is inconsistent in so far as the mixing of different varieties of dried grapes – including those from the whole of area A, which includes an area with a PDO – is permitted in area B, whereas any form of mixing is prohibited throughout area A, including in the second sub'area of area A, which is not protected by a PDO.

58 It follows that that legislation does not impose an absolute prohibition on any mixture of different varieties of dried grapes and that the decisive criterion for the legislature does not appear to have been the quality of the product.

59 In any event, even if the legitimate objective of overriding public interest of protecting consumers and preventing fraud could properly be relied on in the main proceedings, it would still be necessary to ensure that the restriction at issue complies with the principle of proportionality.

60 On the same grounds as those set out at paragraphs 40 and 41 above, which also apply mutatis mutandis to the examination of whether the measures which prohibit dried grapes from area B from being brought into the second sub'area of area A are proportionate, it must be concluded that there are other measures less restrictive of the free movement of dried grapes produced in Greek territory, such as the possibility of requiring the operators concerned to have separate production lines and/or storage facilities and that of requiring appropriate labels to be used according to the geographical origin of the processed dried grapes, as well as the possibility of ensuring that those requirements are complied with by means of spot checks and appropriate penalties.

61 In those circumstances, an absolute prohibition of the movement of dried grapes between the second sub'area of area A and area B, such as that laid down by the legislation at issue in the main proceedings, cannot be regarded as justified on grounds of consumer protection and the prevention of fraud, since it does not pursue that objective consistently and does not comply with the requirements of the principle of proportionality.

62 In the light of the foregoing considerations, the answer to the questions referred is that Article 29 EC must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which lays down an absolute prohibition on bringing in, storing, processing and packing for export dried grapes both as between the two sub-areas of area A and as between the second sub-area of area A and area B, since it does not enable the legitimate objectives pursued to be met consistently and goes beyond what is necessary to ensure the attainment of those objectives.

63 Since these proceedings are, for the parties to the main proceedings, a step in the action pending before the national court, the decision on costs is a matter for that court. Costs incurred in submitting observations to the Court, other than the costs of those parties, are not recoverable.

Article 29 EC must be interpreted as precluding national legislation, such as that at issue in the main proceedings, which lays down an absolute prohibition on bringing in, storing, processing and packing for export dried grapes both as between the two sub'areas of area A and as between the second sub-area of area A and area B, since it does not enable the legitimate objectives pursued to be met consistently and goes beyond what is necessary to ensure the attainment of those objectives.

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You are here: BAILII >> Databases >> Court of Justice of the European Communities (including Court of First Instance Decisions) >> Kakavetsos-Fragkopoulos (anciennement K. Fragkopoulos kai SIA) (Free movement of goods) [2011] EUECJ C-161/09 (03 March 2011) URL: http://www.bailii.org/eu/cases/EUECJ/2011/C16109.html Cite as: EU:C:2011:110, ECLI:EU:C:2011:110, [2011] EUECJ C-161/09, [2011] EUECJ C-161/9

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