C-13/72

Application for annulment of:

— Decision No 72/120/EEC of the Commission of 26 January 1972 on the granting of aid from the European Agricultural Guidance and Guarantee Fund, Guarantee Section, for the expenditure incurred by the Kingdom of the Netherlands, particularly as a result of refunds on exports to third countries during the accounting period 1966/67 (OJ No L 61, p. 15);

— Decision No 72/115/EEC of the Commission of 26 January 1972 deter­ mining the lowest average refunds for financing refunds on exports to third countries during the accounting period 1966/67 (OJ No L 61, p. 1);

THE COURT

composed of: R. Lecourt, President, R. Monaco and P. Pescatore, Presidents of Chambers, A. M. Donner and H. Kutscher (Rapporteur), Judges,

Advocate-General: H. Mayras Registrar: A. Van Houtte

I — Facts and procedure the Fund, while the Commission shall decide, again annually, the aid to be The facts and procedure may be granted from the Fund on the basis of summarized as follows: those applications and after consultation 1. (a) By Article 1 of Regulation No 25 with the Fund Committee (hereinafter of 4 April 1962, 'on the financing of the called the 'Committee'). Under the terms common agricultural policy' (OJ p. 991) of Articles 24 et seq. of Regulation No the Council set up the 'European 17/64, this Committee shall consist of Agricultural Guidance and Guarantee representatives of the Member States and Fund' (hereinafter called the 'Fund'). of the Commission (Article 25 (1)). Under Article 3 (1) of that Regulation, (c) With particular reference to the as amended by Article 8 (1) of sector of milk and milk products, the Regulation No 130/66/EEC of the Council, on 5 February 1964, adopted Council of 26 July 1966 (OJ No 165, p. Regulation No 13/64/EEC 'on the 2965), 'the following expenditure shall gradual establishment of a common be eligible for aid from the Fund: organization of the market' in this sector (a) Refunds on exports to third (OJ p. 549). Under the terms of Article countries, calculated in accordance 14 (2) of that Regulation, 'in order to with the provisions laid down in the permit of exports to third countries on Regulations on individual products the basis of prices ruling on the world on the basis of market, the difference between those prices and the prices of the exporting (i) the rate of refund of the Member State may be covered by a Member State whose average refund'. refund is the lowest, and (ii) the net quantities exported up to 2. (a) In 1966, when examining the and during the accounting accounting period 1963/64, the Committee discussed for the first time period 1966/67 and the gross quantities exported subsequent$$$ ly­ the question of whether expenditure ly; incurred by a Member State, as a result of 'refunds on exports', in food aid (b) to (d)$$$.. . . ' programmes to third countries are (b) On the basis of the said Regulation, eligible for aid from the Fund. It was the Council, on 5 February 1964, then decided that this was so, taking into account the smallness of the amounts adopted Regulation No 17/64/EEC 'on the conditions for granting aid' from the claimed and without, prejudice to any said Fund (OJ p. 586). Under Articles 9 further decision on the subject in the future. and 10 of that Regulation — to which several amendments not affecting the (b) In 1968 and 1969, however, the present case were subsequently made — opposite conclusion was reached the Member States concerned shall, once concerning the accounting periods a year, submit to the Commission an 1964/65 and 1965/66. In the application for reimbursement of the Commission's report on the first of those expenditure incurred as a result of the periods, it is stated in particular on the above-mentioned refunds, which is to be subject of gifts of cereals made by taken over by the 'Guarantee' Section of France:

'It is for the Council to decide whether Member States such as the France may take this expenditure into Netherlands benefiting financially account as ranking for refunds. During while others were placed at a the present negotiations on food gifts of disadvantage, because of the cereals within the framework of the divergent administrative practices in implementation of the Kennedy Round, the Member States'. an opinion was expressed in favour of In a letter in reply to Mr Mansholt, the financing of refunds FOB from the dated 24 June 1970, Mr Spierenburg date of the entry into force of the maintained his point of view. agreement.

. . donated stated that the provisions in force only certain sums to the World Food allowed the granting of refunds for Programme. Through the medium of the commercial operations. At the meeting export trade, that organization has with dealing with the period 1965/66, the these sums bought on the Netherlands representative of the Commission again market and despatched to developing explained the Commission's point of countries the following quantities of view. products covered by the common organizations of the market existing at (c) In a letter dated 9 February 1970

No food aid programmes, as such VI/4640/71 + addendum'). The authors deliveries cannot be considered as a of the addendum considered in trade export within the meaning of particular that a food gift by its very the organization of the Community nature constituted a gratuitous act market'; which, as it was not a commercial — that, further, such financing by the operation, did not necessitate any refund Fund 'would result in certain for it to be completed; that such a gift

refunds on exports to third countries, The parties presented oral argument at for the accounting period 1966/67 the hearing on 7 November 1972. (OJ No L 61, p. 15); under the fifth The Advocate-General delivered his consideration, it is stated 'that the opinion at the hearing on 6 December quantities exported by way of food 1972. gifts are not eligible for aid from the Fund, as expenditure on noncommer­ cial operations cannot be considered II — Submissions of the parties as refunds on exports to third The Netherlands Government submits: countries within the meaning of the Community rules', and that (a) that the 'aid decision' should be 'quantities and expenditure in annulled, 'insofar as the quantities relation to such gifts are therefore to of exports under the heading of food be excluded from net exports and gifts and the expenditure thereby from the calculation of rates of incurred have not been taken into consideration for the calculation of refunds'; the rate of reimbursement of refunds — Decision No 72/115/EEC, addressed on exports'; to all the Member States, published in OJ No L 61 (p. 1) and hereinafter (b) that the 'average refunds decision' called the 'average refunds decision'; should be annulled, 'in the case this decision determines, for the where, and to the extent that, the above-mentioned period and in amounts to be reimbursed to the

JUDGMENT OF 11. 1. 1973 — CASE 13/72

NETHERLANDS v COMMISSION

operations. given (the requirement of a decision Subsequently, the Community itself of the Council) did not appear in the became progressively concerned with 'aid decision'; food aid. The Commission enumerates the measures adopted to this end — Mr Mansholt's letter of 2 April 1970 and the 'aid decision' are based on (agreements with the countries con the non-commercial character of the cerned or international organizations; Regulations of the Council); it deliveries in question, whereas the addendum of 1971 was based on the emphasizes that at the time these steps were taken, the Community did not use notion of a gratuitous act. the system of refunds on exports. The Commission replies firstly by retracing the events leading up to the

The a lack of reference; further, the latter document gives details, as to both Commission should at least have made quantities and refunds, of the food gifts known the final result of its calculations. which were deducted from the As for the 'average refunds decision', it applications for reimbursement. The does not indicate in any way whether Fund Committee examined and and, if so, how, in determining the discussed these documents, also touching lowest average refund, the Commission on the question of whether expenditure took into account quantities of exports on food aid programmes should be under the heading of food gifts, and in taken into consideration or not, on what way it has 'amended' the which question the representative of the information supplied by the Member Netherlands Government clearly stated States on which the decision is based. his position. Further, the Committee Further, the Commission did not were consulted on the draft decisions, indicate precisely what amounts were which subsequently, and without any actually deducted from the reimburse amendment, became the contested ment applied for by the plaintiff and in decisions. The reasons for which the what way these amounts were arrived at. expenditure in question was not allowed According to the jurisprudence of the are to be found in the addendum, the Court, the points of fact and law on essential arguments of which are again which a Community act is based must be brought up by the Commission. presented in a clear and precise manner, As the Netherlands Government was in order that the interested parties, as closely involved in the process of well as the Court, may be able to drawing up the contested decisions, it is recognize the essential factors involved. perfectly well able to acquaint itself with

why, and to the extent of what amounts, calculation of the lowest average refund, expenditure referable to refunds made the determining factor on which that within the framework of food aid had financing is based. not been taken into consideration. Decisions arrived at under such 3. Second plea: Infringement of circumstances do not require detailed Regulation No 17/64 and of Article reasoning. The legal arguments 14 (2) of Regulation No 13/64 presented by the Commission over the The Netherlands Government submits years are perfectly clear; they state that that it would appear from the fifth the existing system does not permit consideration of the 'aid decision' that non-commercial operations, particularly the Commission itself admits that the gratuitous acts, to be taken into operations in question constitute consideration, and that this position 'exports' within the meaning of the could only be changed by an act of the Community rules. Moreover, this is the Council amending the said system. only admissible interpretation; in fact, Referring more particularly to the 'aid no text adopted by the Council or the decision', the fifth consideration, Commission limits the meaning of the although succinct, is clear and to the word 'exports' in such a way as not to point; in particular, the expression include all operations, commercial or 'Community rules' refers to the not, consisting in the despatch of goods provisions governing the grant of from within the Community to a third

It decision and had therefore been brought would appear from Article 19 of to the notice of the Netherlands Regulation No 2637/70/EEC of 23 Government officials. Under the terms of December 1970 'on special rules for the 17th consideration of the preamble implementing the system of import, to Regulation No 17/64, the Committee export and prior determination was set up in order to provide 'close certificates for agricultural products' (OJ cooperation between the Member States No L 283, p. 15) that deliveries made and the Commission', 'to facilitate the 'under the food aid programme' require general working of the Fund'; discussion the presentation of an export certificate. in the body of the Committee therefore These texts show that the expression offers the best opportunity to learn 'exports to third countries' includes about details such as these. operations under the food aid Similar considerations apply to the programme. 'average refunds decision'. It goes The payments in question were based on without saying that if the Commission the combined provisions of Article excludes the amounts in question from 14 (2) of Regulation No 13/64 and Community financing, it could not retain Article 1 of Regulation No 56/66/EEC the corresponding exports in its of the Commission of 23 May 1966 'on

calculating the maximum amount of not based on a commercial operation, refunds on exports of milk products to being influenced by differences in price. third countries' (OJ p. 1422/66), The aim of the above-mentioned authorizing the principle of refunds and provision is not to facilitate exports, but determining the maximum amounts of to facilitate them on the basis of the such refunds respectively. These prices ruling in world trade. The fact, Regulations contain no provision by which is indisputable, that these prices virtue of which the refund cannot be can only be determined on the basis of granted in the case of exports under the commercial operations, is irrelevant in heading of food gifts; further, it is the present case. Further, die covering of incorrect to say that they have always the said difference by a refund conforms been interpreted in that way by the to the objectives of the Community Council and the Commission. As Article agricultural policy, even in cases such as 14 (2) contains only a basic provision those in question, since it helps to rid the requiring subsequent implementation, Common Market of its surpluses.

the Fund. tion No 56/66, included the limitation It is strange that the Commission refuses now claimed by the Commission. to grant the refund in respect of Furthermore, no Regulation ever laid humanitarian gifts when it grants them down, in respect of the grant of the in the case of gifts made within the refund, the slightest condition attaching framework of an advertising campaign, to the basic export operation; one can and when the Fund bears the costs of quote by way of example Regulation destruction of agricultural products. No 1041/67/EEC of the Commission of The Commission replies that, as Article 21 December 1967 'on detailed rules for 3 (1) of Regulation No 25 refers to the the application of export refunds on Regulations dealing with the organiza products subject to a single price system' tion of markets for the definition of (OJ P. 9). measures the expenses of which are One cannot argue against this from the eligible for aid from the Fund, it suffices fact that, under the terms of Article 14 in this case to point out that the of Regulation No 13/64, the refund must payments in dispute are not refunds on 'permit exports to third countries on the exports within the meaning of Article basis of prices ruling on the world 14 (2) of Regulation No 13/64.

JUDGMENT OF 11. 1.1973 — CASE 13/72

It the gift, by definition gratuitous, could have been made whatever the' is particularly significant that under the terms of the second consideration of financial burden incurred by the donor. Regulation No 289/69/EEC of the Council amending Regulation No This argument is supported by Article 30 120/67/EEC concerning the mobilization of Regulation No 13/64 which speaks of of cereals intended for food aid (OJ No 'the system of trade set up by this L 41, p. 1), 'that Regulation' — that is, Regulation', as well as by the 14th Regulation No 120/67 — 'does not consideration of the same Regulation, include the provisions necessary for under the terms of which the refunds implementing the food aid programme'. must be allowed 'in order to safeguard The Commission's interpretation is not participation by the Member States in defeated by other provisions cited by the international trade in milk products'. It Netherlands Government: is also further supported by the — As Article 14 (2) of Regulation No subsequent rules, and particularly by the 13/64 itself contains the answer to stated reasons for and the provisions of the question in dispute, and as it has Regulation No 876/68/EEC of the always been interpreted by the Council of 28 June 1968, 'laying down Council and the Commission as general rules for granting export refunds meaning that it concerns$$$ ■ only on milk and milk products and criteria commercial operations, one does not for fixing the amount of such refunds' see why Regulations Nos 56/66 and (OJ No L 155, p. 1). Lastly, the 1041/67, adopted under this text, Commission's viewpoint is supported by should have given precise details in examination of the function of the respect of this. refunds within the system of

The said Article therefore and also Regulation No 1399/69 of 17 proves that such operations do not July 1969 (OJ No L 179, p. 14). The fall under the system of refunds on Commission gives a detailed analysis of exports in question here. the Community Regulations dealing with — As to Article 1 of Regulation No

2 The application is further for the annulment of Decision No 72/115/EEC of the Commission, of the same date, (OJ No L 61, p. 1) (hereinafter called the 'average refunds decision') — 'in the case where, and to the extent that, the amounts to be reimbursed to the applicant by virtue of the (aid decision) are influenced by the fact that, in determining the lowest average refunds' — the basic factor in the calculation of refunds on exports to third countries eligible for aid from the Fund, in accordance with Article 3 (1) of Regulation No 25 of the Council of 4 April 1962 (OJ p. 991), — 'the quantities of exports under the heading of food gifts ... were not taken into account'.

On the first plea (Infringement of essential procedural require­ ments)

3 The Netherlands Government asserts that the disputed elements of these decisions are vitiated by infringement of essential procedural requirements,

JUDGMENT OF 11. 1. 1973 — CASE 13/72

in that they have not been sufficiently reasoned, as required by Article 190 of the Treaty.

4 With regard to the 'aid decision', the Netherlands Government alleges that in order to explain the exclusion of the quantities of exports under the heading of food gifts, the stated reasons for that decision are restricted to the state­ ment that those quantities 'are not eligible for aid from the Fund, as expendi­ ture on non-commercial operations cannot be considered as refunds on exports to third countries within the meaning of the Community rules'.

NETHERLANDS v COMMISSION

11 The extent of the duty to state reasons, laid down by Article 190 of the Treaty, depends on the nature of the act in question and on the context in which it is adopted.

12 In the present case, it is not disputed that the Netherlands Government was closely involved in the process of making the contested decision and was therefore aware of the reason why the Commission did not consider that it should accede to the demand for reimbursement by the said Government, insofar as it referred to expenses incurred under a food aid programme.

13 In these circumstances, the contested decision must be held to be sufficiently reasoned.

14 With regard to the 'average refunds decision', the Netherlands Government alleges that it does not indicate whether and, if so, how the Commission, in determining the lowest average refund, took into account the quantities of products exported under the heading of food gifts, and in what manner it 'amended' the information from the Member States on which the decision is based.

15 Under the terms of Article 3 (1) of Regulation No 25, 'The following expen­ diture shall be eligible for aid from the Fund ... refunds on exports to third countries calculated', inter alia, 'on the basis ... of the rate of refund in the Member State whose average refund is the lowest'.

19 Under the terms of Article 3 (1) of Regulation No 25, 'The following expend­ iture shall be eligible for aid from the Fund ... refunds on exports to third countries'.

20 Under Article 9 (1) of Regulation No 17/64, on the conditions for granting aid from the Fund, the Member States concerned shall, once a year, submit to the Commission an application for reimbursement 'of the expenditure incurred as a result of refunds on exports to third countries ... relating to the period from 1 July to 30 June and which is to be taken over by the Guarantee Section of the Fund', whilst under Article 10 of the same Regulation, 'the Commission shall decide annually ... after consultation with the Fund Committee, the aid to be granted from the Fund', which it did for the accounting period 1966/67, by the contested 'aid decision'.

21 With regard to the sector of milk and milk products, which alone concerns this case, Article 14 (2) of Regulation No 13/64 lays down that 'in order to encourage exports to third countries on the basis of prices ruling on the world market, the difference between those prices and the prices in the exporting Member State may be covered by a refund'.

22 Regulations Nos 25 and 17/64 must be taken, in respect of the scope of the expression 'refunds on exports to third countries' as referring to the basic Community Regulations authorizing Member States to grant such refunds.

23 The question to be answered therefore is whether the expenditure in dispute constitutes refunds on exports to third countries, within the meaning of Article 14 (2) of Regulation No 13/64.

28 Further, the transactions thus entered into by the said State and the sellers constitute commercial operations.

29 Moreover, as Regulation No 13/64 was adopted on the basis of Articles 38 et seq. of the Treaty dealing with agriculture, it must be interpreted in the light of the objectives stated in Article 39, and in particular those which aim 'to ensure a fair standard of living for the agricultural community, in parti­ cular by increasing the individual earnings of persons engaged in agriculture', and 'to stabilize markets'.

30 Article 14 (2) of Regulation No 13/64 must therefore be interpreted as encouraging all exports to third countries which contribute to the realization of those objectives.

31 Such was the case with the exports in dispute, as they comprised a preli­ minary purchase of the products in question on the domestic market and, therefore, contributed in maintaining or increasing sales possibilities for the farmers of the Member State concerned.

JUDGMENT OF 11. 1. 1973 — CASE 13/72

32 The fact that the Netherlands Government took the place of the importing country or its importers as buyer is not relevant, as the economic effect of creating and maintaining outlets to third countries for the said farmers is the same in either case.

38 It must therefore be ordered to pay the costs.

On those grounds,

Upon reading the pleadings; Upon hearing the report of the Judge Rapporteur; Upon hearing the oral arguments of the parties; Upon hearing the opinion of the Advocate-General; Having regard to the Treaty establishing the European Economic Community, especially Articles 38, 39, 173 and 190; Having regard to Regulation No 25 of the Council on the financing of the common agricultural policy (OJ of 4 April 1962, p. 991/62), especially Article 3; Having regard to Regulation No 13/64/EEC of the Council on the gradual establishment of a common organization of the markets in the sector of milk and milk products (OJ of 27 February 1964, p. 549/64), especially Article 14;

NETHERLANDS v COMMISSION

Having regard to Regulation No 17/64/EEC of the Council on the conditions for granting aid from the European Agricultural Guidance and Guarantee Fund (OJ of 27 February 1964, p. 586/64), especially Articles 9 and 10; Having regard to the Protocol on the Statute of the Court of Justice of the European Economic Community; Having regard to the Rules of Procedure of the Court of Justice of the European Communities, especially Article 69;

THE COURT

Delivered in open court in Luxemburg on 11 January 1973.

A. Van Houtte R. Lecourt

Registrar President