C-5/75

on the validity and interpretation of Regulations No 2859/73 of the Commission of 19 October 1973 and No 175/74 of 23 January 1974, both amending Regulation No 1897/73 of the Commission of 11 July 1973 fixing the denaturing premium for common wheat for the 1973/74 marketing year,

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

Under Article 4 (1) of Regulation No During October 1973 the Commission 172/67 of the Council of 27 June 1967 felt it possible to discern that the world market in common wheat had moved on general rules governing the denaturing of wheat and rye of rapidly towards a tight situation and that bread-making quality (OJ p. 2602) the this had brought about successively the denaturing premium for common wheat, limitation of the duration of validity of the amount of which may vary, is fixed export certificates, the termination of before the beginning of and for the import levies and the introduction of an duration of each marketing year. export levy. In view of the development of such a situation, it appeared to it The Council, in Regulation No 644/68, proper that the incentive for the of 29 May 1968, amending Regulation denaturing of common wheat should be further reduced because such wheat, No 172/67 (OJ L 122, p. 3), considered, in particular, that the inability to adjust owing to a premium which was excessive the premium during the crop year can, in the prevailing circumstances, when the factors' on which it is based competed in particular with barley for change considerably during the year, which the market situation gave rise to reduce or increase the incentive to fears of large-scale intervention. Since it denature cereals, thus disturbing the considered that collectively these elements threatened to disturb the balance of the market, in particular when the market situation obliges intervention market and therefore the denaturing agencies to buy in large quantities of premium should be reduced, the cereals. It therefore considered that Commission by Regulation No 2859/73 although it was necessary to publish the of 19 October 1973, amending amount of the premium before the Regulation No 1897/73 (OJ), decided that as from 1 November 1973 the beginning of the crop year, adjustments should be allowed where the balance of amount of the denaturing premium for the market was likely to be disturbed; as common wheat, including the increases a result it supplemented Article 4 (1) of resulting from the application of the Regulation No 172/67 by a second provisions of the second paragraph of paragraph providing that the denaturing Article 1 of Regulation No 1897/73, should be reduced to an amount varying premium might be adjusted during the crop year where the balance of the between 7 units of account per metric ton for November 1973 and 8-32 units of market in cereals is likely to be disturbed. account per metric ton for July 1974.

premium of only 7 units of account per 1. Is Regulation (EEC) No 2859/73 of metric ton. the Commission of 19 October 1973 amending Regulation (EEC) No At the beginning of 1974 the 1897/73, fixing the denaturing Commission considered that the pressure premium for common wheat for the on the world market for common wheat 1973/74 marketing year (OJ L 293, had further increased and that the

was notified to the intervention wheat on the Community market had agency in the form prescribed by it caused considerable price increases and, before 1 November 1973 but for as a result of an increased demand for which the technical admixture was cereals for animal feed, it appeared that carried out only after 1 November the denaturing premium should be 1973 although still within the reduced to zero, the Commission, by prescribed time limit? Regulation No 175/74 of 23 January 3. Is Regulation EEC No 175/74 of the 1974, amending Regulation No 1897/73 Commission of 23 January 1974 (OJ (OJ L 20, p. 28) fixed the denaturing L 20, p. 28), which fixed the premium at zero as from 10 February denaturing premium as from 10

time limit? The plaintiff objected to the defendant's The order of the Verwaltungsgericht decisions and on 12 February and Frankfurt-am-Main was registered at the 24 May 1974 applied to the Court on 16 January 1975. Verwaltungsgericht (Administrative Court) Frankfurt-am-Main. Written observations were submitted under Article 20 of the Protocol on the The latter, by order dated 17 December Statute of the Court of Justice of the 1974 under Article 177 of the EEC EEC on 21 March 1975 by the Treaty, stayed the proceedings until the Commission of the European Court of Justice had given a preliminary Communities and on 1 April by the ruling on the following questions: plaintiff in the main action.

After hearing the report of the premium at any time it pleases during Judge-Rapporteur, and the Advocate- the marketing year; the only exception General, the Court decided to open the would be where there was the threat of oral procedure without any preparatory an unforeseeable disturbance in the inquiry. market in maize and barley, in particular when the factors on which the premium had been fixed at the beginning of the II — Written observations sub year change greatly during the course of mitted to the Court the year. The denaturing premium for wheat A — On the validity of Regulations comprises both compensation for the Nos 2859/73 and 175/74

the costs. The third recital of Regulation No 172/67 states that the existence of the (a) As regards the validity of Regulation denaturing premium should be known to No 2859/73, it is right to observe that possible beneficiaries from the beginning the Commission seeks to justify the of the marketing year, in order to enable reduction in the denaturing premium by them to plan a suitable use for denatured stating that on the one hand the world market in common wheat had moved common wheat.

1897/73. follows from these two considerations that the Commission is not entitled to The other finding of the Commission revoke or amend the denaturing that since denatured wheat competed

with barley in the fodder sector it could alter the rate of the premium, which is involve large-scale intervention in respect alone lawful, but abolishes it, that is to of barley, does not justify a reduction in say abolishes the whole of the annual the encouragement to denature wheat by programme of denaturing during the a reduction in the premium. The course of the marketing year. The legal quantities of wheat and barley from the terms of the authority provided for by 1973 harvest offered for intervention in the basic Regulation No 172/67 were the Federal Republic of Germany up to thus exceeded. 31 October 1973 were some 45 000 tons less than that offered during the same The reduction of the premium to zero period of the previous year in spite of a constitutes excessive intervention in the much larger harvest. arrangements which producers must necessarily make in the context of On 25 October 1973, the Commission long-term planning as regards the found a surplus of common wheat composition of the various special representing more than 50 % of the fodders and the supply of the annual requirements of the Community; constituents of the mixture and the this surplus could have been reduced prices of the mixed fodder. To remove only by denaturing. Moreover a reduction the industry's interest in denaturing of the processing of wheat into fodder during the 1973/1974 marketing year, would necessarily have involved a the Commission should have been corresponding increase in the purchase content with abolishing the 'incentive'; of wheat of bread-making quality by the the complete abolition of the premium, intervention agencies, with financial including the difference in prices and the results identical to those of denaturing. compensation for the costs, exceeded the Finally, the factors on the basis of which limits of the legal authority. The the denaturing premium had been fixed Commission thus violated the general in July 1973 had not changed in any way principle of proportionality. While the up to October 1973. annual plan was still in progress, the Commission could not put an end to it The legal conditions allowing a reduction so brusquely, ignoring the arrangements in the denaturing premium during the made and putting the costs on the marketing year had obviously not been industrial undertakings. In a planned fulfilled at the time Regulation No system of economic intervention, the 2859/73 was adopted; on the contrary, public authority accepts, with regard to there is cause for thinking that the the industry affected by the planning and reduction was made basically for exposed to certain risks, the obligation of subjective reasons, in particular to effect guaranteeing the implementation, savings. On this account the Commission execution and orderly development of is guilty of a misuse of powers. the plan.

organization of the market, from the subject to the existence of surpluses; on denaturing premium and from the this point the Commission was obliged particular grounds for Regulation No to revise its statement of resources and to 644/68. The denaturing of cereals of limit the forced reduction of wheat bread-making quality is not in itself an stocks, carried out until then with the objective of the common organization of assistance of a relatively high denaturing the cereal market; the denaturing premium, to go over to a policy of premium is an exceptional intervention increased stocking. justified as a supplementary measure of alleviation where there are surpluses Moreover, the fact that Community which cannot be disposed of by other prices of wheat had been overtaken by

limited. Finally, the denaturing premium denaturing in comparison with the must, by its nature and function, adapt to previous year. the situation of the market. All these considerations taken together To determine whether in a particular justify the decision taken by the case there is a 'threat of disturbances', the Commission, on the basis of the Commission must make a thorough information which it had at the time, to analysis of the changing factors of the reduce, by Regulation No 2859/73, the cereal market and make a forecast of its denaturing premium to an amount probable future state. In both cases it which, while still encouraging the necessarily has a wide discretion; denaturing of wheat, prevented the applying the case-law of the Court, the denatured quantities from taking on Regulations in issue in the main action exaggerated proportions and menacing would cease to be covered by the both the market in feed grains and the authority of Article 4 of Regulation No supply of wheat of bread-making quality. 172/67 only if the Commission had manifestly made a serious mistake in (b) The situation of the world wheat market, characterized by growing judging the position of the market or been guilty of an abuse of power. scarcity, uncertain supply possibilities and constantly increasing prices, became (a) The world wheat market during the rapidly more serious until mid-January 1972/1973 marketing year was 1974: wheat prices reached record levels characterized by limited supply in the and the uncertainty of meeting the needs face of a considerable growth in demand, of imports was increased by reason of the large increases in price and serious cereal market being divided between reduction of stocks; this situation was cartels and the transport difficulties aggravated still further during the resulting from the lack of fuel.

JUDGMENT OF 25. 6. 1975 — CASE 5/75

in relation to those of October 1973: from the beginning of the marketing wheat prices had greatly increased and year to allow them to provide for the this increase would have been even more reasonable use of denatured common marked by a reduction in the supply of wheat. It is therefore right to take into wheat by denaturing; since the prices of account the steps taken by the barley and maize likewise greatly beneficiaries; if such steps of a general increased, and the difference between nature should be protected, this applies them and the price of wheat appreciably particularly to such as relate especially to diminished, it was no longer necessary to the individual operation of denaturing. apply to wheat the artificial means provided by the denaturing premium to In addition to the provision of make it competitive as a feed grain. Regulation No 172/67, numerous national provisions, emanating from the In this situation the Commission decided German intervention agency, are not only to increase the restrictive applicable to the particular denaturing measures on exporting wheat but also to operation. The result is in particular that abolish the denaturing premium after the denaturing undertaking is entitled as having found that even after the from formal notice to the intervention reduction of the premium in October agency of the denaturing operation, to 1973 large quantities of wheat had still use the period comprised between the been denatured. month in which the application is made and the end of the following month to Regulations No 175/74 and No 2859/73 do the technical mixing, since such thus respected the conditions laid down mixing cannot be done until the time of in the enabling provision of Article 4 (1) sale.

DEUKA v EINFUHR- UND VORRATSSTELLE GETREIDE

Since denaturer a right to a particular the denaturing premium is an premium; the intervention agency's exceptional intervention measure, its agreement on the date on which the grant and its amount can be altered denaturing is to be carried out does not according to the state of the market; mean that the premium is fixed in protection of confidence cannot be advance: the sole purpose is to ensure invoked against alterations arising from official control of the operation and in the correct application of provisions any event Community rules adopted made in accordance with established intentionally cannot be deprived of effect rules.

wheat properly denatured under intervention agency cannot assume supervision before the entry into force of obligations going beyond those in Regulations Nos 2859/73 and 175/74 accordance with Community rules. respectively, and, secondly, that no Finally, there can be no question of importance can be attached to the fact legitimate confidence on the part of the that before the dates on which the said denaturer in the payment of an unaltered Regulations took effect the plaintiff premium when, as appears to be the case in the main action, the national notified its intention of carrying out a particular denaturing to the intervention intervention agency is requested to fix agency for the purpose of checking and the date of checking at a time when it is that the plaintiff received the agency's already known that the original amount

waltungsgerichtshof). No doubt it is right legality of its action is subject to judicial to take account as far as possible of the control.

Law

1 By order dated 17 December 1974, filed at the Registry of the Court on 16 January 1975, the Verwaltungsgericht Frankfurt am Main put under Article 177 of the EEC Treaty four questions on the validity and, as a subsidiary question, the scope in point of time of Regulations No 2859/73 of the Commission of 19 October 1973 and No 175/74 of the Commission of 23 January 1974 amending Regulation No 1897/73 fixing the denaturing premium for common wheat for the 1973/1974 marketing year (OJ 1973, L 293, p. 31 and 1974, L 20, p. 28).

Questions 1 and 3 (substantive justification of Regulations Nos 2859/73 and 175/74)

2 The first question asks whether Regulation No 2859/73 reducing the denaturing premium on common wheat originally fixed for the 1973/74 marketing year is compatible with the second sentence of Article 4 (1) of Regulation No 172/67 of the Council of 27 June 1967 on general rules governing the denaturing of wheat (OJ p. 2602) as amended by Article 1 of Regulation No 644/68 of the Council of 29 May 1968 (OJ L 122, p. 3). The

DEUKA v EINFUHR- UND VORRATSSTELLE GETREIDE

third question asks whether Regulation No 175/74 of the Commission of 23 January 1974, which fixes the amount of the denaturing premium at zero as from 10 February 1974, is compatible with the same provision.

4 Under Article 4 of Regulation No 172/67 of the Council as amended by Article 1 of Regulation No 644/68, the Commission may adjust the denaturing premium during the course of the marketing year 'where the balance of the market in cereals is likely to be disturbed'. In order to meet the threat of disturbance, the Commission has wide discretion both as regards the possible factors of disturbance which it considers and the choice of means intended to meet it, which must be exercised in the light of the objectives of economic policy laid down by the basic Regulation in the matter, that is Regulation No 120/67 of the Council of 13 June 1967 on the common organization of the market in cereals (OJ p. 2269), in the context of the common agricultural policy. The discretion allowed to the Commission includes the power completely to suspend payment of the premium if the economic circumstances require. 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 powers.

5 The doubts raised by the national court reveal no evidence of such an error or misuse of powers. It is right to observe more particularly in this respect that in the grounds of the measures which it has taken, the Commission has been able to refer pertinently to the movement of the world cereal market, on which the Community market is largely dependent, having regard to the freedom of external trade. In the grounds of the Regulations challenged the Commission has referred to a growing pressure on the world market, particularly marked at the time of Regulation No 175/74. This pressure,

8 The order of reference stresses in this respect the fact that, since all the arrangements had been made by the plaintiff in the main action for the purpose of the denaturing and the sale of the denatured wheat at the time the application was made to the intervention agency, the payment of a reduced premium and the total abolition of the premium would no longer in any have been able to achieve the objective aimed at by the Regulations in question. Further, the protection of confidence requires that the calculations of commercial operators based on the level of the premium in force at the time when the denaturing was begun, should not be upset without compelling reasons.

DEUKA v EINFUHR- UND VORRATSSTELLE GETREIDE

9 Article 4 of Regulation No 172/67 of the Council in its original form shows it as normal that denaturing operations should be determined on the basis of the annual cereal marketing year. This perspective was not fundamentally altered by Regulation No 644/68, Article 1 of which gives alterations of the denaturing system during a marketing year an exceptional character, since such alterations cannot be made except where there is a threat of disturbance in the market. It cannot therefore be considered abnormal for a denaturing undertaking to arrange its projects for the entire cereal marketing year.

10 Where, therefore there has been a commitment to denaturing before the expiry of the periods stipulated in Regulation Nos 2859/73 and 175/74 — respectively 1 November 1973 and 10 February 1974 — by the submission to the intervention agency of the application provided for by Article 4 (2) of Regulation No 172/67, relating to quantities of goods bought before the entry into force of one or the other of the Regulations referred to according to the case, it is right to apply, in the interests of legal certainty, for the computation of the amount of the denaturing premium, the provisions in force at the time the application was lodged, even if the technical mixing is not done until a subsequent date, albeit within the period prescribed by the intervention agency.

in answer to the questions referred to it by the Verwaltungsgericht Frankfurt am Main by order dated 17 December 1974, hereby rules:

1. Examination of the questions raised has not revealed any factor capable of affecting the validity of Regulations No 2859/73 of the Commission of 19 October 1973 and No 175/74

of 23 January 1974, amending Regulation No 1897/73 of 11 July 1973 fixing the denaturing premium for common wheat for the 1973/74 marketing year.

2. Regulation No 2859/73 cannot be applied to denaturing which has been notified to the intervention agency before 1 November 1973 in the form prescribed by it, but in respect of which the technical mixing has not been done until after 1 November 1973, albeit within the period prescribed for this purpose.

3. Regulation No 175/74 does not apply, in the same circumstances, to denaturing which has been notified to the intervention agency before 10 February 1974.

Lecourt Mertens de Wilmars Mackenzie Stuart Donner Monaco