C-162/73

JUDGMENT OF THE COURT OF 21 FEBRUARY 1974 <apnote>1</apnote>

Birra Dreher SpA v Amministrazione delle Finanze dello Stato

(preliminary ruling requested' by the Pretore di Roma)

'Production refunds for broken rice'

Case 162/73

Summary

JUDGMENT OF 21. 2. 1974 — CASE 162/73

BIRRA DREHER SPA, whose registered office is in Venice,

on the interpretation of Regulation No 367/67 of the Council of 25 July 1967, fixing production refunds on maize groats and meal and broken rice used in the brewing industry, and of Regulation No 2085/68 of the Commission of 20 December 1968, on certain detailed rules for granting the production refund on broken rice,

THE COURT

composed of: R. Lecourt, President, M. Sørensen, President of Chamber, R. Monaco, P. Pescatore (Rapporteur), H. Kutscher, C. Ó Dálaigh and Lord Mackenzie Stuart, Judges,

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

manufacture of starch and, on the other available to the industry at a price lower hand, by fixing the refund on broken than that resulting from the world rice at a level which reduces the price to market situation alone and that the brewing industry to 8·30 u.a. per 100 consequently it was not necessary to kg; the authors of the Regulation took grant a refund when the c.i.f. price was the view however that in view of the equal to or higher than the threshold current state of the world market in price. broken rice, the refund on that product Consequently Article 1 of Regulation No should be limited, so long as prices on 852/67 provided that production refunds the market remained high, in such a way should not be granted when the c.i.f. as, first, to deter imports at prices below price for broken rice was equal to or the world market level and, secondly, to greater than the threshold price for that prevent the financial burden of product. production refunds from becoming Measures for implementing these

rice, Article 1 (2) of this Regulation u.a.; if, however, the c.i.f. price was provides that the amount of the refund higher than 8·30 u.a., the production shall be that in force on the day of refund was to be equal to the difference delivery to the brewing industry. Article between the threshold price and the c.i.f. 2 provides that the refund shall be paid' price for broken rice. bY the Member State in whose territory Under Article 2 of the Regulation, the broken rice is produced only when Member States were to take all necessary that State has ascertained by checks that measures to ensure that refunds were the broken rice has actually been used in limited to the quantities of broken rice the industry for which it was intended. actually used by the brewing industry in According to Article 3 (2) of the

JUDGMENT OF 21. 2. 1974 — CASE 162/73

The order of the Rome Pretore was 1. Whether, in granting special production refunds on broken rice lodged at the Court Registry on 4 September 1973. used in the manufacture of beer, Regulation No 367/67 of EEC of the In pursuance of Article 20 of the Council was intended to place broken Protocol on the Statute of the Court of rice, meant for use in this way, on the Justice of the EEC, written observations same level of competitiveness and were submitted on 14 November 1973 cheapness as other cereals (particu­ by the Commission of the European Communities and on 26 November 1973 lary maize) for which similar refunds have been provided when they are by the plaintiff in the main action. used for the same purpose Upon hearing the report of the (manufacture of beer). Judge-Rapporteur and the opinion of the

BIRRA DREHER v AMMINISTRAZIONE DELLE FINANZE DELLO STATO

The written and oral observations 1. The aim for which the refund was submitted to the Court may be instituted appears from the following summarized as follows: considerations.

A — As to the reference to the Court (a) As far as concerns the objectives of the common agricultural policy as they The Government of the Italian Republic are recorded in Article 39 (1) of the EEC states that the application for an order Treaty, a comparison between Regu­ of the national court ('en injonction') lation No 367/67 and certain Regulations which is a preliminary and summary providing for refunds for other products procedure, does not allow of argument shows that the production refund for on both sides before that Court with broken rice used in the brewing industry regard to the formulation of the was only instituted in order to 'ensure questions which the latter refers to the reasonable prices in deliveries' to users. Court of Justice. To admit of the This objective is expressly confirmed by possibility of a reference to the Court in the recitals in the preamble to these conditions would amount to Regulation No 852/67, according to sanctioning inequality in the judicial which the aim of the refund is to permit process and would create discrimination broken rice to be made available to the between nationals of various Member industries using it at a price lower than States depending on differences in the that which would result from applying national systems of judicial procedure. the system of levies and common prices. Birra Dreher, the plaintiff in the main Regulation No 2085/68 provides action, points out that no rule of additional confirmation of the intention

of the Community institutions to ensure based on the assumption that the reasonable prices for users by means of agricultural producer lowers the price the production refund: the import demanded of the brewers to the extent refund instituted by the latter can of the amount of the refund and thus obviously only have the aim of ensures that the benefit of the refund is encouraging Community importers of enjoyed by the person for whom it is broken rice and, according to the actual actually intended. words of one of the recitals in the In a case where, as here, the user pays preamble to the Regulation, it is the producer of the broken rice a price intended to ensure that broken rice will which does not take the refund into not be affected by the levy; in other account, the producer is not entitled to words its aim is to reduce the price to the refund, not having given the user the

countries. As far as broken rice is concerned, the expression 'production refund' cannot be (c) The Commission's proposition, interpreted as equivalent to 'refund to according to which the refund was the producer'; the very fact that the instituted in the sole interests of the Regulations prescribe a production producer of the broken rice, cannot be refund in favour of importers excludes accepted. such equivalence. The most reasonable interpretation of Regulation No 367/67 From the point of view of pure logic it is leads to recognition that a private party appropriate to recognize that the entitled to collect the refund may be allocation of a subsidy to the producer either the producer or the user, of broken rice — who moreover is according to whether the price agreed generally not an agricultural producer between them does or does not take but an industrialist — simply does not account of the amount of the refund; guarantee the sale of the broken rice on thus the free will of the parties gives the market; to attain that objective it is appropriate effect to the aims which the necessary rather to arrange for the user Community Regulations have set to be enabled to acquire it at a themselves. competitive price by comparison with This alternative is not excluded either by that for competing synthetic products. Regulation No 367/67 of the Council or From the economic point of view, if the by Regulation No 2085/68 of the Commission's theory were correct it Commission: the first realizes the would be hard to understand why a intention to confer an advantage on the refund is granted only for broken rice Community brewing industry, so that used by starch factories and breweries, the persons entitled to the refund would whereas broken rice has other more be the brewers, whilst the second is important uses; recognition of this fact

establishes that refunds have a purpose June 1970 which requires the user of the other than that of guaranteeing to the broken rice to produce the express producer continuous market outlets at consent, in writing, of the producer. stable prices. (a) At first sight this provision appears Legally it would be absurd to think of not to conflict with the Community granting to the producer a refund which Regulations: its aim is to guarantee that would result in annihilating the effects of the producer is hot deprived of the Community levies instituted to protect refund, his consent establishing that, at that very producer; moreover the fact the time of the fixing of the price, the that the refund is granted also to the parties freely disposed of the refund in importer contradicts the Commission's favour of the user.

reasonable safeguard. In this respect it is Regulation No 2085/68 of the appropriate to call attention to the fact Commission cannot be interpreted as that the general agreement concluded reserving the grant of the refund only to between the national associations of the the producer of broken rice, to the brewery and rice industries provides that exclusion of the user; in this case it as from 1 October 1970 refunds for would have to be considered as void, as broken rice used in the brewing industry it would introduce a restriction contrary go entirely to the user and that to this to Regulations Nos 367/67 and 852/67, intent the supplier is to place on the which the Commission is prohibited invoice an endorsement in favour of the from doing by Article 155 of the EEC user. In the present case there is no Treaty. reason to make the user suffer the The Commission's proposition, in its damaging consequences of a fact for extreme consequences, would result in which he is not responsible so long as he the refund's being paid to the producer proves his right to the grant of the of the broken rice even if, as in the refund. The reference to the written present case, he has received a price of consent of the producer of the broken 15 units of account per 100 kg, whereas, rice can only constitute at the most a the Object of the refund is to reduce the subsidiary proof in the event of its purchase price of broken rice to 8·30 u.a. turning out, to be impossible to per 100 kg; the fact that the Commission determine, in particular on the basis of itself refuses to admit this absurd the prices actually paid by the user and consequence demonstrates the weakness the market prices of broken rice, to of its arguments. whom the refund should be paid.

JUDGMENT OF 21. 2. 1974 — CASE 162/73

(a) The fact that the refund is paid and The reply to the third question should the checks on the use of the broken rice also be in the negative: the producer are carried out by the Member State into cannot lay claim to the refund when he whose territory the broken rice is has sold the broken rice at the full price; imported or in which it is produced, the brewer's rights cannot be superior to even when it is intended for use in those of the person entitled to the another Member State, proves that a refund. direct link has been established between The fourth question is only a minor one. the refund and the production of the It leads however to a finding that any broken rice. assignment of the right to a refund from

BIRRA DREHER v AMMINISTRAZIONE DELLE FINANZE DELLO STATO

1. It is incontestable that the products. As it was a question of production refund for broken rice used ensuring equality between the suppliers in the brewing industry is granted to the of various raw materials to the brewing producer of the broken rice: he is to be industry it was logical that the refund considered as the person entitled to the for maize groats and meal and broken refund. rice should be granted to the producer — who is in competition with the starch (a) This finding follows from the manufacturer, who himself enjoys a actual wording of the rules in question. refund for this product. The objective In particular Article 3 (2) of Regulation pursued by means of the refund was not No 2085/68, laying down the detailed to help the purchaser or the user, but to rules for granting the refund, takes assist the agricultural producer, to account only of an application from the ensure a fair income for him by putting producer and does not envisage any him back into a good competitive application from the brewery. position for marketing broken rice as (b) The production of and trade in against other raw materials. broken rice — a product appearing in (d) The fact that the refund is also Annex II to the EEC Treaty — come granted for imported broken rice by no under the agricultural provisions of the means proves that the refund was Treaty; that is not the case with beer. instituted for the benefit of breweries. No doubt it would have been possible, Regulation No 359/67, in the words of on the basis of Article 43 of the Treaty, Article 29, is to be 'so applied that to provide for the grant of the refund to appropriate account is taken, at the same manufacturers of a product not time;, of the objectives set out in Articles appearing in Annex II on condition that 39 and 110 of the Treaty'; this reference the economic advantage was to go to Article 110 indicates that the refund entirely to the agricultural producer; for for imported broken rice is not for this purpose however it would have been protectionist ends, but is justified by necessary in this case for Regulation No objectives of commercial policy. 359/67 on the common organization; of the market in rice and Regulation No 2. Neither the wording nor the 367/67 fixing production refunds on objective of the Regulations regarding broken rice used in the brewing industry the production refund for broken rice

requires that the benefit of this refund achievement of this objective, which is a should accrue to the brewery using it. secondary one, by granting the brewery a right to the refund, the Community (a) No provision in any Regulation institutions relied on the effects of expressly provides that the refund supply and demand on the market. In a granted to the producer of broken rice free market the very existence of the used in the brewing industry must in one refund has an influence on the price way or another be transferred to the structure and competition has its effect buyer or used to reduce the selling price. between sellers of broken rice, between The producer simply has to provide products which can technically be proof that the broken rice for which he substituted for it and indeed between is applying for a refund has actually broken rice produced in the Community been used in the brewing industry. and imported broken rice, which, (b) The proof of the actual use of the equally, enjoys a production refund. broken rice by the brewing industry suffices to' achieve the immediate The fact that a brewery using broken rice does not derive any benefit from the objective of the rules regarding the grant of the production refund to the refund. The refund is justified by the fact producer of the broken rice is not, in that starch, a product in competition with broken rice, is itself the object of a itself, contrary to the primary intention of the refund. production refund; it is intended above all to re-establish the balance of 3. This conclusion is in fact equally competition between broken rice, maize valid in so far as and to the extent to groats and meal and starch as regards which the functioning of the market has the market which, for all these products, been able to take full effect and is represented by the brewing industry. producer and brewer have been able to (c) The primary objective of the negotiate the sale price by taking the production refund, contrary to the grant of the refund into account; when opinion of the plaintiff in the main the parties to the contract have agreed, action, is not to allow breweries to in negotiating the sale price, that the acquire broken rice at a preferential refund granted to the producer is to be price or to ensure for them the same transferred in whole or in part to the supply price for all the raw materials brewery using the broken rice, used. No doubt the refund, intended Community rules do not oppose the essentially to re-establish the balance implementation of this agreement. between the suppliers of the various raw materials used in the brewing industry, Community Regulations, after determin­ does tend to maintain in being the outlet ing the persons entitled to the refund, for these raw materials provided by have entrusted its payment to Member breweries, and which the intention was States; the problems connected with an. to protect by exerting an effect on the assignment of claim from the producer price structure of broken rice. But, to the user are thus entirely a matter of instead of trying to ensure the domestic law.

It makes the point in this connexion that such a procedure has not the characteristics of a normal defended action inasmuch as the Court, adjudicat­ ing simply on the basis of allegations presented by the plaintiff, can make an order against the other party without having given him the opportunity to present his observations. The proceedings are contested only in the event of the party against whom the order is made raising objections to the decision. In the course of the proceedings the party concerned has no opportunity to submit his observations on the expediency of a reference for a preliminary ruling or, if need be, to take part or collaborate with the national court in drawing up the questions to be referred to the Court of Justice.

3 According to Article 177 of the Treaty, the procedure regarding preliminary rulings is open to any national court or tribunal. It is sufficient to determine that the Pretore, in hearing the application for the grant of an order, is exercising the functions of a court or tribunal within the meaning of Article 177 — as has moreover previously been decided — and that an interpretation of Community law has been considered by that court as essential for it to arrive at a decision, without its being necessary for the Court of Justice to consider the stage of the proceedings at which the question was put. Article 177 does not make the reference to the Court subject to whether the pro­ ceedings at the conclusion of which the national court has drawn up the reference for a preliminary ruling were or were not defended.

5 In pursuance of Article 9 of Regulation No 359/67 of the Council of 25 July 1967 on the common organization of the market in rice (OJ No 174, p. 1), a 'production refund' shall be granted for broken rice which has been used either by the starch industry or by the brewing industry.

This provision corresponds to that of Article 11 of Regulation No 120/67 of the Council of 13 June 1967 on the common organization of the market in cereals (OJ No 117, p. 2269), which makes provision for a similar refund for maize and common wheat used by the starch industry as well as for maize used for the manufacture of maize groats and meal (gritz) used by the brewing industry.

6 By virtue of Article 1 of Regulation No 367/67, Member States shall grant a production refund both for maize groats and meal and for broken rice used in the brewing industry. Article 2 of the same Regulation requires them in addition to take all necessary measures to ensure that the refunds are limited to the quantities of maize groats and meal and of broken rice actually used by that industry.

BIRRA DREHER v AMMINISTRAZIONE DELLE FINANZE DELLO STATO

7 In its turn Regulation No 2085/68 of the Commission lays down certain detailed rules for granting a refund on the importation or production of broken rice. In particular Article 3 (2) of this Regulation specifies that in order to receive payment of the refund the 'producer' of broken rice shall submit to the competent authorities an application accompanied by certain evidence intended to establish that the rice has been used for the purposes referred to in the Regulation.

10 This conclusion is not invalidated by the fact that Regulation No 2085/68 of the Commission grants the refund not only to the producer but also to the

JUDGMENT OF 21. 2. 1974 — CASE 162/73

importer of broken rice. This implementing provision, necessitated by the fact that, for imported broken rice, the producer is outside the sphere of application of Community law, does not result in any modification in the nature of the refund, as a production refund, laid down by the basic Regu­ lation No 359/67 and confirmed by the implementing Regulation No 367/67 of the Council.

These particular detailed implementing rules introduced by the Regulation of the Commission in fact only aim at placing on a basis of equality imported broken rice and broken rice originating within the Community without at the same time altering the intrinsic nature of the refund. No argument can therefore be based on the fact that the brewer-user may occasionally be identical with the importer of the goods.

11 Finally, a national implementing provision which recognizes a right to the refund on the part of the brewer using the broken rice only in the event of such right's having been expressly assigned to him by the producer cannot be considered as incompatible with the system set up by the Community's Regu­ lations. In fact, since the brewer using the broken rice cannot avail himself of a right directly conferred by the said Regulations, such a right can only be vested in him by virtue of an express assignment by the producer.

12 Consequently it is appropriate to reply to the questions put, in so far as they raise a legal problem of interpretation, that the brewer who has paid for broken rice at the market price not taking account of the refund cannot assert a direct right to benefit from the latter, and that a system permitting the transfer to the brewer of the right to the refund by virtue of the formal agreement of the producer, with the consequence that in the absence of such an agreement the brewer cannot assert any direct right, is not incompatible with those Regulations.

in answer to the questions referred to it by the Pretore of Rome by order of 29 August 1973, hereby rules:

1. A brewer who has paid at the market price for broken rice intended for the brewing of beer cannot assert a direct right to the grant of the refund referred to in Article 9 of Regulation No 359/67 of 25 July 1967 and Regulation No 2085/68 of 20 December 1968;

2. Member States may, by domestic implementing measures, permit the transfer to breweries of the right to the refund by virtue of the formal consent of the producer.

Lecourt Sorensen Monaco

Pescatore Kutscher Ó Dálaigh Mackenzie Stuart

Delivered in open court in Luxembourg on 21 February 1974.