C-99/76

In Joined Cases 99 and 100/76

Reference to the Court under Article 177 of the EEC Treaty by the Verwaltungsgericht (Administrative Court) Frankfurt am Main, for a preliminary ruling in the action pending before that court between

N.V. ROOMBOTERFABRIEK 'DE BESTE BOTER', having its registered office in Best (Netherlands),

1 — Language of the Case: German.

JUDGMENT OF 11. 5. 1977 - JOINED CASES 99 AND 100/76

FIRMA JOSEF HOCHE, BUTTERSCHMELZWERK, having its registered office in Speikern (Federal Republic of Germany)

Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and Issues

The facts, procedure and observations possibility of recourse to special measures submitted under Article 20 of the for the sale of butter which is held in Protocol on the Statute of the Court of public storage and which cannot be Justice of the EEC may be summarized marketed on normal terms during the as follows: current milk marketing year.

By Regulation No 985/68 of 15 July I — Facts and procedure 1968 (OJ, English Special Edition 1968 (I), p. 256) the Council laid down general The intervention system laid down by rules for intervention on the market in

p. 204) the Council empowered the regard to the price of other fats and oils Commission, after consulting the competing with butter. Management Committee for Milk and Milk Products, to adopt special measures To prevent butter from being diverted for the sale of butter from public storage. from its destination it appeared necessary to the Commission to set up a system of In view of the fact that a feature of the control operating from the time the Community butter market was the butter is removed from storage until it is existence of large stocks as a result of processed.

which must itself be effected within To avoid prolonged storage because of 30 days of the receipt by the tenderer the high cost involved and to facilitate of the notification by the intervention the disposal of surplus butter it lays agency of the result of his down the conditions of sale of this butter participation in the invitation to at a price competitive with that of other tender; fats and oils to manufacturers of pastry, (d) to keep stock accounts for all stages biscuits, cakes and other fine bakers' of marketing; wares (coming under heading 19.08 of (e) to lay down that, for any subsequent the Common Customs Tariff), ice-cream resale of the treated concentrated (coming under subheadings 18.06 B and butter, the same obligations which he 21.07 C) or ice-cream powder (coming himself has undertaken with regard under subheadings 18.06 D or 21.07 F). to the destination of the product, the It provides that butter shall be sold by period for processing and the keeping means of a standing invitation to tender of stock accounts shall form part of opened by each intervention agency for the contract of sale. the quantities of butter concerned held

JUDGMENT OF 11. 5. 1977 - JOINED CASES 99 AND 100/76

Einfuhr- und Vorratsstelle für Fette by Article 18 (2) of Regulation No 1259/72, decision dated 27 January 1976, and as amended by Commission Regulations N.V_ Roomboterfabriek 'De Beste Boter' No 2161/72 of 10 October 1972 and No and Josef Hoche brought the matter 1237/73 of 10 May 1973 (OJ L 128, p.l) before the Verwaltungsgericht Frankfurt provides that save in cases of force am Main on 26 February 1976. majeure the processing deposit shall be released only for quantities in respect of Another processing undertaking which which the succesful tenderer has was to manufacture from the supplied proof that the conditions concentrated butter various powders for referred to in Article 6 of Regulation No the manufacture of 'soft ice' did not 1259/72 have been met. process 4 692.24 kg of butter representing 3 830.4 kg of concentrated Article 18 (2) (a) provides that where all butter into the products laid down by the butter processing operations have Regulation No 1259/72.

registered office of which is in Best January and revoked the notice of 6 (Netherlands), bought from the Einfuhr- January in so far as it declared the und Vorratsstelle für Fette (Fats Import deposit for 3 321.6 kg of concentrated and Supply Office), to which the butter forfeit; although this quantity had Bundesanstalt fur landwirtschaftliche not been processed in accordance with Marktordnung is the successor in title, Regulation No 1259/72, it had butter at a reduced price from nevertheless been processed in intervention stocks and lodged the accordance with the provisions of necessary processing deposit.

BESTE BOTER AND HOCHE v BUNDESANSTALT FÜR LANDWIRTSCHAFTLICHE MARKTORDNUNG

by Regulation (EEC) No 1237/73 of himself carry out processing within the Commission of 10 May 1973 (OJ the meaning of Article 6 (1) (c) of L 128/1 of 15. 5. 1973) to be Regulation No 1259/72 — has interpreted as meaning that the proof fulfilled his obligations under Article required to enable the deposit to be 6 (1) (a), (b), (d) and (e) of the released is only regarded as having regulation mentioned above, or is the been furnished if it is clear from the release also in such a case always document to be issued by the conditional upon the processed national authority under the second goods, as evidenced by the subparagraph down to the end of beforementioned document, com­ indent (a) of Article 18 (2) of plying with the conditions prescribed Regulation No 1259/72 that the in Article 6 (1) (c)? successful tenderer — who does not (c) In both cases: himself carry out processing within If the second alternative mentioned the meaning of Article 6 (1) (c) of in (a) above is accepted is the first Regulation No 1259/72 — has subparagraph of Article 18 (2) and the fulfilled his obligations under Article second subparagraph thereof down to

JUDGMENT OF 11. 5. 1977 - JOINED CASES 99 AND 100/76

any preparatory inquiry. By letter of 3 price and the minimum purchasing price February 1977 the Bundesanstalt für in accordance with the guarantee referred landwirtschaftliche Marktordnung was to as the processing deposit. Where the however invited to reply in writing to a butter is properly used the successful question raised by the Court; this answer tenderer has the benefit of the reduction was lodged on 2 March 1977. in price provided for; otherwise he pays only the market price by losing the By order dated 26 January 1977, the processing deposit. The same results Court decided under Article 95 (1) of the follow where the time-limits for Rules of Procedure to refer the case to processing are not respected. the Second Chamber. (b) Article 18 (2) of Regulation No 1259/72 does not infringe the principle II — Written observations sub­ of proportionality. mitted to the Court By paying the purchase price The Bundesanstalt für landwirt­ corresponding to the market situation as schaftliche Marktordnung, the defendant a result of the loss of the processing in the main action, is of the opinion that deposit where the butter bought at a in both cases the processing deposit was reduced price is not duly processed, rightly forfeited under the first undertakings simply pay the equivalent subparagraph and second subparagraph of the non-reduced price of butter in down to the end of indent (a) of Article accordance with market conditions.

BESTE BOTER AND HOCHE v BUNDESANSTALT FÜR LANDWIRTSCHAFTLICHE MARKTORDNUNG

The Communities states that Regulation No certificates supplied by the Member 232/75, cited by the plaintiffs in the States do not bring about the release of main action, does not apply in the the processing deposit unless they present case: the applicable regulation is confirm that the processing has in fact therefore Regulation No 1259/72 as taken place. consolidated by Regulation No 2815/72. Contrary to the opinion of the plaintiffs in the main action the definitive With regard to the questions raised the processing within the periods stipulated Commission has the following and in accordance with the provisions of observations on the interpretation of the Article 6 (1) (c) is imperative. applicable provisions of Regulation No 1259/72 taking account of its objectives: This processing is the objective of the whole action of price reduction.

The cases to the butter being processed into terms referred to in Article 6 (1) (a), (b), the prescribed products within the (d) and (e) are only secondary obligations periods provided for. affecting the successful tenderer only if he wishes to use the processing facilities The first sentence of Article 18 (2) offered him by the provisions of Article 6 provides that except in cases of force (1). majeure the processing deposit shall be released 'only for quantities in respect of If the condition provided for in Article 6 which the successful tenderer has (1) (c) is not fulfilled the action furnished the proof that the conditions undertaken cannot attain its objective referred to in Article 6 have been met.' and there is no reason to grant the There is no exception to this; the terms tenderer the reduction of price requested which it imposes thus include processing by releasing the deposit.

(b) The validity of Article 18 (2) of the whole purchase price. The plaintiffs Regulation No 1259/72 in the main action are claiming a considerable price-reduction representing Article 6 of Regulation No 804/68 and the consideration for processing within Article 7a of Regulation No 985/68 the agreed period whereas this processing constitute the legal basis of the rules has not taken place. It is not unjust but established by Regulation No 1259/72. in accordance with the principles of the The fact that these provisions do not law of contract that the intervention expressly refer to the processing deposit agency should refuse the consideration is irrelevant: it is true that the processing due from it whilst the successful tenderer deposit is in the nature of a financial does not fulfil his own obligations. guarantee but it is not an independent guarantee of performance in addition to In accordance with the rules of the other obligations entered into by the commercial and civil law generally successful tenderer. On the contrary it is applied the successful tenderer is part of the conditions agreed for responsible for the acts of his agents in payment of the selling price: the butter breach of contract. obtained by the successful tenderer represents consideration exactly in The plaintiffs in the main action and not accordance with the market situation. the purchasers from them contracted The purchase price to be paid is thus the with the intervention agency duly to market price less a reduction if the process the butter within the specified purchaser fulfils the conditions laid down period; it is vis-à-vis them that the in Article 6 of Regulation No 1259/72. purchasers from them are contractually When taking over the butter the bound to carry out the processing. The purchaser pays the minimum part of the intervention agency is not in a position purchase price which he will in any to require the various purchasers to do event have to pay. He provides a the processing which the plaintiffs in the guarantee to cover the difference between main action have contracted to do; only this minimum price and the agreed the plaintiffs themselves are able to do market price and this allows the this. As regards the reduction of price intervention agency to obtain the part of claimed it is therefore just that the the selling price not yet paid if the plaintiffs should also bear vis-à-vis the processing operations agreed upon are intervention agency the risk of not carried out. non-fulfilment by their agents.

compatible with the superior rules of preamble to Regulation No 1259/72 Community law and in particular shows clearly that the system of with the principle of proportionality. supervision, intended to ensure that the butter is not diverted from its destination, applies only until the III — Oral procedure processing. The deposit can therefore relate only to the processing stage N.V. Roomboterfabriek 'De Beste Boter' referred to in Article 6 (1) (c) and not to and Firma Josef Hoche, the plaintiffs in the cases of subsequent resale. the main action, represented by Klaus-Dieter Schneider, Rechtsanwalt of (b) Article 18 of Regulation No the Oberlandesgericht Nürnberg, the 1259/72 cannot be regarded as valid: it Bundesanstalt für landwirtschaftliche disregards the principle of Marktordnung, the defendant in the proportionality. It makes the successful main action, represented by the Director tenderer liable not for his own acts or of its Legal Department, Erdmann omissions or for those of an agent but for Schaller, and the Commission of the the acts of a third party with whom he European Communities, represented by has no direct commercial relationship, its Legal Adviser, Peter Kalbe, submitted whom he is not able to control and oral observations at the hearing on 17 against whom, as experience shows, it is March 1977. in fact impossible to guarantee himself At this hearing the plaintiff companies contractually or by legal proceedings. in the main action, Roomboterfabriek 'De Beste Boter' and Josef Hoche made (c) The deposit is in no way equal to the following observations in particular: the difference between the market price and the minimum purchase price; on the (a) The successful tenderer who does contrary the minimum price, plus the not himself carry out the processing of deposit, is always higher than the the butter satisfies his obligations when intervention price which is itself almost in accordance with Article 6 (1) (e) of invariably higher than the market price. Regulation No 1259/72 he lays down Concrete examples prove this. The loss that, for any subsequent resale, the same of the deposit does not mean therefore requirements as those referred to under that the successful tenderer pays the Article 6 (1) (c) and (d) shall form part of normal market price for the butter. In the contract of sale. The obligations of such case the successful tenderer is the successful tenderer do not extend penalized in a way not provided for by beyond the undertaking which he has the relevant Community law. entrusted with the processing; in particular they do not concern the The Advocate-General delivered his ultimate user. The fourth recital in the opinion at the hearing on 28 April 1977.

4 For the purpose of creating fresh opportunities for disposing of surplus butter the Commission established by Regulation No 1259/72 a system involving the sale by tender of butter at a reduced price to certain processing undertakings in the Community. Article 6 of that regulation provides that a tenderer may not take part in the invitation to tender unless he gives certain undertakings consisting mainly of having the butter processed into concentrated butter (Article 6 (1) (a)), of incorporating certain substances therein (Article 6 (1) (b)), having this product processed only into certain specific products, such as fine bakers' wares and doing this within a period of six months (Article 6 (1) (c)), keeping stock accounts (Article 6 (1) (d)) and laying down that, for any subsequent resale of the concentrated butter, the same requirements as those referred to under (c) and (d) should form part of the contract of sale (Article 6(1) (e)). To ensure performance of the obligation to process, the successful tenderer must lodge a deposit, the amount of which is fixed at a level intended to cover the difference between the market price of the butter and the minimum sale price (Article 9 in conjunction with Article 12). Article 18 (2) provides that except in cases of force majeure the processing deposit shall be released only for quantities in respect of which the successful tenderer has furnished proof in a specific manner that the conditions referred to in Article 6 have been met.

5 The first question put by the Verwaltungsgericht is basically whether the successful tenderer who does not himself manufacture the processed products has furnished the proof necessary to have the deposit released by showing

7 Such an interpretation cannot be upheld. Article 10 (5) provides that rights and obligations arising out of the invitation to tender shall not be transferable. The third paragraph of Article 18 (2) stipulates that the Member States may provide for the proof to be considered as furnished if the seller submits a statement from the final user in which the latter confirms his undertaking to process the products and states that he is aware of the sanctions he may incur, determined by the Member State concerned, and it must be concluded from these provisions that in the absence of any such right under national law the successful tenderer cannot escape his obligations by relying on the undertaking entered into by the purchaser under the terms of the contract of sale. Consideration of the objective of the provision in question confirms this conclusion. The system established by Regulation No 1259/72 is a special measure intended to dispose of surplus butter to the food industry on particularly favourable conditions. It was therefore necessary to take appropriate precautions to ensure that the butter sold on these conditions did not reach the normal market but was in fact processed within a period allowing the regularity of the operation to be checked. The effectiveness of the system of checking would be seriously compromised if the acceptance of an obligation to process by a subsequent purchaser who was not himself under any legal obligation to the competent authority were regarded as sufficiently discharging an undertaking entered into by the successful tenderer against a deposit.

10 The legal basis of the system established by Regulation No 1259/72 is, inter alia, Regulation No 985/68 of the Council of 15 July 1968 (OJ, English Special Edition, 1968 (I), p. 256) and in particular Article 7a inserted by Regulation No 750/69 of the Council of 22 April 1969 (OJ, English Special Edition 1969 (I), p. 204). This provides that the Commission shall examine the situation and adopt appropriate measures as regards products in public storage which cannot be marketed on normal terms during a milk year. There is no reason for thinking that the system established by Regulation No 1259/72, taken as a whole and more particularly providing for the lodging of a processing deposit, is not an appropriate measure within the meaning of Article 7a. This article is therefore the proper legal basis for Regulation No 1259/72 the adoption of which is in accordance with the opinion of the Management Committee for Milk and Milk Products.

13 It must therefore be concluded that consideration of the second question raised by the Verwaltungsgericht has disclosed no factor of such a kind as to affect the validity of the second subparagraph down to the end of indent (a) of Article 18 (2) of Regulation No 1259/72.

Costs

14 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, in the nature of a step in the action before the Verwaltungsgericht Frankfurt am Main, the decision as to costs is a matter for that court.

On those grounds,

THE COURT (Second Chamber),

in answer to the questions referred to it by the Verwaltungsgericht Frankfurt am Main by orders dated 9 September 1976, hereby rules:

Registrar President of the Second Chamber

OPINION OF MR ADVOCATE-GENERAL REISCHL DELIVERED ON 28 APRIL 19771

Mr President, certain Community processing Members of the Court, undertakings (OJ, English Special Edition 1972 (II), p. 559). It is aimed at Article 6 of Regulation No 804/68 of the encouraging the use of butter in the food Council on the common organization of industry, namely in the production of the market in milk and milk products bakers' wares and ice-cream where for (OJ, English Special Edition 1968 (I), p. price reasons it is not usually used. The 176) provides that 'special measures may regulation, as amended, in so far as is be taken for butter held in public relevant for the present proceedings, by storage' (that is, intervention butter) Regulations No 2815/72 of the 'which cannot be marketed on normal Commission (OJ, English Special terms during a milk year'. A similar Edition 1972, 30-31 December, p. 5), No provision is contained in Article 7a of 677/73 (OJ L 65 of 10. 3. 1973, p. 16), Regulation No 985/68 of the Council No 1237/73 (OJ L 128 of 15. 5. 1973, p. laying down general rules for 1) and No 576/74 (OJ L 70 of 13. 3. intervention on the market in butter and 1974, p. 24) provides as follows: cream (OJ, English Special Edition 1968 (I), p. 256) as amended by Regulation No The butter is to be sold by means of a 750/69 of the Council (OJ, English standing invitation to tender; during the Special Edition 1969 (I), p. 204). period of validity of that invitation, individual invitations to tender are to be

This was the basis for Regulation No issued to which interested parties may 1259/72 of the Commission on the respond with tenders. On the basis of disposal of butter at a reduced price to this a minimum selling price is to be