## Facts

- The European Economic Community concluded a 1980 cooperation agreement granting Yugoslavia preferential tariff treatment, including a tariff quota with reduced duties for certain wines.
- Firma A. Racke GmbH & Co., a German importer, imported wine from Yugoslav territory and claimed preferential duties under the agreement.
- Following the disintegration of Yugoslavia and armed conflict, the Council adopted Regulation (EEC) No. 3300/91, effective 15 November 1991, suspending trade concessions under the agreement.
- German customs (Hauptzollamt Mainz) assessed full customs duties on Racke’s post-effective-date imports; Racke disputed the assessment.
- Racke argued the agreement allowed denunciation only with six months’ notice, so preferential treatment should have continued; it also claimed immediate suspension violated customary international law, including *pacta sunt servanda* and limits on suspension for fundamental change of circumstances.
- The German Federal Finance Court referred questions to the Court of Justice for a preliminary ruling on direct effect and validity.

## Issues

1. Whether the Court could review the validity of an EU regulation for incompatibility with customary international law in a preliminary reference on validity.
2. Whether the tariff-quota provision of the cooperation agreement conferred directly effective rights on individuals before national courts.
3. Whether individuals could invoke customary international law (including *pacta sunt servanda* and rules on suspension for fundamental change of circumstances) to challenge the validity of an EU regulation.
4. Whether Regulation 3300/91 was invalid because immediate suspension of concessions was not justified under customary international law.

## Decision

- The Court held it may assess validity of EU acts on any ground capable of affecting validity, including conflict with international law.
- The Court ruled the tariff-quota provision was directly applicable because it imposed a clear, precise, and unconditional obligation not dependent on further implementing measures.
- The Court held individuals may rely on relevant rules of customary international law to challenge the validity of EU measures affecting treaty-based concessions, subject to limited judicial review where institutions have broad discretion in external relations.
- The Court upheld Regulation 3300/91 as valid, finding the Yugoslav disintegration and armed conflict constituted a fundamental change of circumstances justifying suspension and that no manifest error or misuse of powers was shown.

## Legal Principles

- In preliminary rulings on validity, judicial review extends to all grounds that may invalidate an EU act, including incompatibility with customary international law.
- A provision of an international agreement has direct effect when, considering its wording and the agreement’s nature and purpose, it sets a clear and precise obligation not conditioned on subsequent measures.
- Customary international law forms part of the legal framework governing external relations and can serve as a standard for reviewing the validity of secondary legislation, including at the instance of individuals.
- In external relations, where political and diplomatic assessments are involved, judicial review is limited; the Court intervenes only for manifest error, misuse of powers, or procedural misuse.
- Under customary international law, exceptional suspension of treaty obligations may be justified by a fundamental change of circumstances; compliance depends on whether the institutions’ assessment stayed within their lawful discretion.

## Conclusion

The Court confirmed that a clear tariff concession in an external agreement could be invoked directly by an importer, but upheld the immediate regulatory suspension of those concessions because the breakup of Yugoslavia constituted a fundamental change of circumstances under customary international law and the Council’s assessment did not exceed its discretion.


Firma A. Racke GmbH & Co. v. Hauptzollamt Mainz, Case C-162/96, 1998 E.C.R. I-3655 (C.J.E.U. 1998)