C-78/74

THE COURT

composed of: R. Lecourt, President, J. Mertens de Wilmars and A. J. Mackenzie Stuart, Presidents of Chambers, A. M. Donner, R. Monaco, P. Pescatore (Rapporteur), H. Kutscher, M. Sørensen and A. O'Keeffe, Judges,

Advocate-General: A. Trabucchi

Registrar: A. Van Houtte

gives the following

JUDGMENT

common organization of the market in common wheat, having a specific weight cereals (OJ p. 2269) provides that the lower than that determined for the intervention agencies designated by the standard quality. Member States may, within the By its Regulation No 644/68 of 29 May framework of the general rules laid 1968, amending Regulation No 172/67 down by the Council, grant a denaturing (OJ L 122, p. 3) the Council recited, premium for common wheat. inter alia, that inability to bring about Under the provisions of Article 4 (1) of during the course of the marketing Regulation No 172/67 of the Council of year 1 a change in the denaturing 27 June 1967 on general rules governing premium — Article 4 (1) of Regulation the denaturing of wheat and rye of No 172/67 provides that the premium is bread-making quality (OJ p. 2602) the fixed before the beginning of and for the denaturing premium for common wheat, duration of each marketing year — the amount of which may vary, shall be could, when the factors on which it was fixed before the beginning of and for the based changed considerably during the duration of each marketing year. year, reduce or increase the incentive to denature cereals, thus disturbing the The first fixing of the denaturing balance of the market, in particular premium for common wheat, in respect where the market situation obliged of the marketing year 1967/68, was the intervention agencies to buy in large

By its Regulation No 956/68 of 12 July quality (OJ p. 2963) the qualitative 1968, on new detailed rules for applying conditions that justify denaturing. the provisions on the denaturing of Pursuant to Article 2 of this Regulation, common wheat and rye of breadmaking common wheat denatured by the quality (OJ L 164, p. 9), the Commission intervention agencies or the subject of a on the one hand maintained the denaturing premium must have a specific reduction in the denaturing premium for weight greater than a fixed weight, common wheat having a specific weight which varies between 70 and 73 kg/hi inferior to that determined for the according to the region, it must have a standard quality and on the other hand,

JUDGMENT OF 18. 3. 1975 — CASE 78/74

marketing years. quality and in particular the satisfactory Regulation No 956/68 was replaced by progress made in the disposal of Regulation No 1403/69 of the surpluses of common wheat of a high Commission of 18 July 1969 (OJ L 180, specific weight involved a risk of p. 3), which did not modify the disturbances on the market in this cereal provisions relating to the increase in the if denaturing was still encouraged, the denaturing premium.

Regulation No 1404/69 added to the 1970, the Deuka company denatured 8 920 342 kg of common wheat of a first component of the premium — intended to take into account the specific weight in excess of 77 kg/hi. difference between the prices of common The German intervention agency, the Einfuhr- und Vorratsstelle fur Getreide wheat and of barley — a fixed und Futtermittel, paid to the Deuka supplementary amount of 2.50 units of

Deuka company on 25 November 1970 tially in excess of those involved at the against the refusal of the Einfuhr- und time when the denaturing premium was Vorratsstelle was, by judgment of 24 fixed by Regulation No 1404/69, in February 1971, rejected by the particular by reason of the developments Verwaltungsgericht of Frankfurt-on- that had meanwhile occurred on the Main, as unfounded. world market, so that in order to avoid Upon appeal dated 5 April 1971, the disturbances on the Community cereal Hessischer Verwaltungsgerichtshof (Vlth market it was necessary to take the Senate) by order dated 8 July 1974,

decided to suspend its decision under the II — Observations submit provisions of Article 177 of the EEC ted to the Court Treaty until the Court of Justice had given a preliminary ruling on the following questions: A — As to the statement of reasons in Regulation No 849/70 (Question 1. Whether Regulation (EEC) No 1 (a)) 849/70 of the Commission of 11 May 1970 (OJ L 102 of 12. 5.1970, p. 7) Deuka, the plaintiff in the national was invalid proceedings, recalls that Article 190 of (a) by reason of an insufficient the EEC Treaty obliges the Commission, statement of reasons, or when dealing with a regulation, to indicate at least all the circumstances (b) by reason of the non-fulfilment of leading to its adoption and the general the conditions of Article 4 (1), objectives which it seeks to achieve.

Since 2. In the event of Question 1 being Regulation No 644/68 of the Council had set out the circumstances under answered in the negative: whether which a threat of disturbance of the Articles 1 and 2 of Regulation (EEC) No 849/70 were in any case invalid, market might exist, in the sense that the in so far as they laid down that the factors on which the denaturing increased denaturing premium should premium was based must change so be discontinued even in respect of considerably that the incentive to common wheat with a specific weight denature is reduced or increased, the exceeding 77 kg/hi which had already recitals of Regulation No 849/70 of the been purchased by the denaturer Council ought at least, in relation to the before that Regulation came into variations in these factors, to contain force. indications that would allow both the Court and the parties involved to verify The order of the Hessischer them and, if necessary, their tendency to Verwaltungsgerichtshof was received at bring about a disturbance of the market. the Court Registry on 17 October 1974. However, the only factual element Written observations were lodged on 17 referred to by the Regulation in question December 1974 by the Commission of

The Regulation Judge-Rapporteur and the opinion of the contains no justification for disconti Advocate-General the Court decided to nuing only the increase in premium for open the oral procedure without any common wheat of a specific rate in preparatory inquiry. excess of 77 kg/hi. It gives no reason

why the attraction of the supplementary B — As to the existence of a 'threat of premium should involve a risk of disturbance' (Question 1 (b)) disturbance, nor how its discontinuance Deuka considers that the disturbance of would prevent this. the market relied upon by the Neither the Court nor the interested Commission could only have consisted parties therefore have the possibility of of a generalized insufficient supply of checking the necessity and the relevance common wheat of bread-making quality of Regulation No 849/70. This to the Community mills and of an regulation is null and void because it is inability to obtain a sufficient supply of insufficiently reasoned. this kind of wheat on the Community

At the that matter the purposes and beginning of the month of May 1970 justification of the particular measures prices in fact evolved normally and decreed in this field. To the plaintiff in became stabilized above the interven the national proceedings, the circum tion price. stances and the motivation which If there really had been the threat of governed the adoption of Regulation No disturbance the Commission would have 849/70 ought therefore to have been had to terminate completely its self-evident. The adaptation of the denaturing operations, reducing to zero amounts of the denaturing premium to the denaturing premium for all kinds of the real situation of the market common wheat of bread-making quality. constitutes one of the essential elements Common wheat having a specific weight of this system; since certain difficulties in excess of 77 kg/hi has no market of of obtaining supplies had arisen at the its own; on the contrary, types of end of the marketing year 1969/70 and common wheat having different specific since the particular reasons for the weights are interchangeable. increase of the denaturing premium by In fact the Commission did not intend to Regulation No 158/69 had disappeared, avoid disturbances of the market but to the Commission had been obliged to save itself applying the increase in the remedy the situation by appropriate denaturing premium as soon as the measures, which in the field of threat represented by the existence of denaturing could only have been by surpluses of common wheat had been reducing the level of the premium. removed.

Article 4 of economic and circumstances, is not in a Regulation No 172/67, amended by position to make an objective appraisal. Regulation No 644/68, recognizes the

necessity of providing the parties in particular to wheat of superior involved with the opportunity of making quality, of which the Community long-term arrangements in advance; the production is not normally sufficient to possibility of putting an end to the cover the requirements and for which denaturing system can therefore only be the Community market normally offers used in case of absolute necessity and sufficient marketing possibilities. only to the extent strictly necessary to Regulation No 644/68 has the purpose avoid the threat of a disturbance of the of allowing the Commission preventively

the parties involved had already before with the absorption capacity of the the publication of Regulation No 849/70 sector of food for human consumption. purchased from the intervention agencies common wheat for denaturing on the The Commission obviously has a certain basis of their invitations to tender and discretionaty power in relation to clearly with their consent; on the other whether there exists a threat of hand this wheat could no langer be disturbance of the balance of the market made available to mills for the and as to whether one ought to manufacture of flour for bread-making. encourage or put a brake on denaturing The Commission considers that the by modifying the amount of the concept of 'disturbance' of the market premium. In particular, the legality of within the meaning of Article 4 (1), Regulation No 849/70 could only be second sentence of Regulation No put in doubt if the Commission had 172/67 arises from the general principles manifestly committed a grave error of pursued by the system of denaturing judgment in its assessment of the market premiums within the framework of the situation at that period or if it had been policy of organizations of the markets as guilty of a misuse of power.

In and with a view to avoiding these circumstances the Commission had repercussions on the market in fodder not only the right but the duty to take cereals likely to compromise the price preventive measures, particularly by way guarantees in this sector. The denaturing of adaptation of the amounts of the premium must therefore necessarily be denaturing premium so as to direct such adapted to the situation of the market. reserves of quality wheat as were still As regards the market in cereals for available within the Community to the bread-making, or indeed that in fodder sector of food for human consumption. cereals, a 'threat of disturbance' exists when one may fear that the equilibrium The reduction in the denaturing of the market might be endangered by premium had to be both sufficiently the denaturing of excessively large efficient and proportionate to the quantities of wheat. This finding applies purpose to be attained; this is why the

Commission refrained from making a Commission. The request for a general reduction of premiums and preliminary ruling ought therefore to be limited itself to dicontinuing those limited to purchases that took place increases which were calculated on the prior to 23 April 1970. basis of differences in quality. The regulations relating to the denaturing premium did not provide for C — As to the protection of the the fixing in advance of the amount legitimate confidence of the citizen thereof; Article 4 (1) of Regulation No (Question 2) 172/67 does not allow the parties involved to claim an entitlement to the Deuka points out that the parties permanent grant of a constant and involved who had made advance unchanging amount. purchase and sale arrangements for the Nor can the plaintiff in the national

implementation. The cereals purchased with a view to denaturing could no III — Oral procedure longer be used to supply mills for bread production; Article 1 of Regulation No 849/70 could not have taken effect in Deuka, the plaintiff in the national relation to common wheat that was the proceedings, represented by Fritz Modest subject of contracts concluded before 12 and Barbara Festge, Advocates, of May 1970. These contracts therefore Hamburg, and the Commission of the needed protection, failing which the European Communities, represented by parties involved would have suffered a its Legal Adviser, Peter Kalbe, made their damage not compensated by an oral observations at the hearing of 5 advantage accruing to the common February 1975 when they submitted the new factors which are hereinafter organization of the market. summarized:

DEUKA v EINFUHR-UND VORRATSSTELLE GETREIDE

disturbances when it maintained the regards quantities of cereals brought into denaturing premium itself, which was a intervention, the evolution of the market sum ten times higher. prices and of intervention prices and the The Commission's appraisal of the quantitative evolution of denaturing — market situation at the time when it argues that the market at the time of the made Regulation No 849/70 is clearly decision in question had been tainted by error and misuse of powers: characterized by a substantial increase in Article 4 (1) of Regulation No 172/67, as denaturing and a reduction in the amended by Regulation No 644/68, does quantity of common wheat available. Of the different courses of action available not enable the Commission to change to it the Commission had after mature the denaturing premium during a reflection chosen the least radical marketing year unless there are intervention. exceptional circumstances; in fact the Commission had only alleged a slight The denaturing premium is not a disturbance and had clearly erred when support measure for the fodder industry; assessing the real situation of the no guarantee was given for its stability market; it used an excessive instrument and the discontinuance of the increase in of intervention which was neither the premium occurred at a moment necessary nor even suited to attaining when it was possible both to ensure the the objective intended. efficacy of the measure and to limit the The Commission — basing itself in disadvantages to undertakings. particular on the cereal balance for the The Advocate-General delivered his 1969/70 marketing year, the data as opinion on 26 February 1975.

(b) by reason of the non-fulfilment of the conditions of Article 4 (1), second sentence, of Regulation No 172/67 of the Council of 27 June 1967 on the general rules governing the denaturing to wheat (OJ p. 2602), amended by Article 1 of Regulation No 644/68 of the Council of 29 May 1968 (OJ L 122, p. 3).

3 Article 7 of Regulation No 120/67 of the Council of 13 June 1967 on the common organization of the markets in cereals (OJ 1967, p. 2269) provides, within the framework of intervention measures, the possibility of the grant of a denaturing premium for common wheat. Under the same article the Commission is instructed to adopt general rules governing the conditions for the grant of denaturing premiums and the amount thereof, in accordance with the general rules adopted by the Council. These rules are the subject-matter of Regulation No 172/67. Article 4 (1) of that Regulation provides that 'the denaturing premium for common wheat, the amount of which may vary, shall be fixed before the beginning of and for the duration of each marketing year .. .'. Since the application of this rule had caused market disturbances as a result of short-term changes that had occurred during the marketing year, Regulation No 644/68, by Article 1 thereof, supplemented Article 4 (1) of Regulation No 172/67 by adding that the denaturing premium 'may be adjusted during the crop year where the balance of the market in cereals is likely to be disturbed'. Finally, the procedures for the grant of these premiums were laid down in respect of the period in question by Regulation No 1403/69 of the Commission of 18 July 1969 (OJ L 180, p. 3).

6 The statement of reasons in Regulation No 849/70 must be considered and assessed in the context of the compley of regulations of which this act is an integral part. The preambles to Regulation No 172/67 and 644/68 bring out both the general objective of the denaturing operations — to sustain the price of cereals of bread-making quality — and the more specific need for taking into account the qualitative characteristics of the goods subjected to denaturing, linked to the wish to avoid disturbing by the operations the balance of the whole cereals market. In this connexion the second recital of the Regulation in question, viz. No 849/70, refers to the fact that 'present circumstances in the market in cereals of bread-making quality, and in particular the satisfactory progress made in the disposal of surpluses of common wheat of a high specific weight, may disturb the market in that cereals where denaturing is still encouraged'. When considered in the context of the system in which it took effect, the discontinuance of the increase in the premium obviously has the purpose, by discontinuing the inducement to denature certain qualities of wheat of bread-making quality, of avoidin the disturbances which the Council Regulation has in mind. Being thus specifically linked to the criterion which, under Article 1 of Regulation No 644/68, allows an adjustment of the denaturing premium during the marketing year, Regulation No 849/70 fulfills the requirement of statement of reasons laid down by Article 190 of the Treaty. Its validity cannot therefore be attacked under this heading.

9 When examining the lawfulness of the exercise of such freedom, the courts cannot substitute their own evaluation of the matter for that of the competent authority, but must restrict themselves to examining whether the evaluation of the competent authority contains a patent error or constitutes a misuse of power.

The allegations of the plaintiff in the main action have revealed no indication of such an error or such a misuse of power. It is not in dispute that at the time of the measure in question there existed on the market a certain tension as regards the supply of cereals of bread-making quality belonging to the type of goods the denaturing of which gave rise to payment of an increased premium under Article 4 (2) and Annex II of Regulation No 1403/69. In the choice of means for the purpose of dealing with the situation, the Commission was entitled to prefer the discontinuance of an increase in the premium rather than a modification of the amount of the basic premium or, as was suggested by the plaintiff in the main action, favouring the importation of goods of the same type from third countries.

10 Accordingly, it appears that the validity of Regulation No 849/70 cannot be questioned from the point of view of the criterion of 'likelihood of disturbance' to which Regulation No 644/68 subordinated the modification of the amount of the denaturing premiums during the course of the cereal marketing year.

DEUKA v EINFUHR-UND VORRATSSTELLE GETREIDE

On the second question (the effect of the discontinuance of the increase of premiums on pending contracts)

14 Accordingly, for the sake of legal certainty, Regulation No 849/70 had to be applied in such a way that there might still benefit from the system under Article 4 (2) of Regulation No 1403/69 those quantities of goods in respect of which it was established that they were purchased before the coming into force of Regulation No 849/70, provided the request under Article 4 (2) of Regulation No 172/67 was made to the intervention agency before the expiry of the time-limit arising from Regulation No 849/70, i.e. before 1 June 1970.

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Interpreted in this way, Regulation No 849/70 contains no provision the validity of which could be doubted.

Costs

15 The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable, and as these proceedings are, in so far as the parties to the main action are concerned, a step in the action pending before the national court, costs are a matter for that court.

On those grounds,

A. Van Houtte R. Lecourt

Registrar President