C-114/76

2. Agriculture — Common organization of the markets — Skimmed-milk powder held by intervention agencies — Compulsory purchase — Council Regulation (EEC) No 563/76 -Invalidity

1. Community arrangements which 2. Council Regulation No 563/76 of 15 impose a discriminatory distribution March 1976 on the compulsory of the burden of costs between the purchase of skimmed-milk powder various sectors of agricultural held by intervention agencies for use production cannot be justified for the in feeding-stuffs is null and void. purpose of attaining the objectives of the common agricultural policy.

In Case 114/76

Reference to the Court under Article 177 of the EEC Treaty by the Landgericht Oldenburg for a preliminary ruling in the action pending before it between

BELA-MÜHLE JOSEF BERGMANN KG, Langförden (Germany),

and

Advocate-General: F. Capotorti Registrar: A. Van Houtte

gives the following

JUDGMENT

Facts and issues

The facts, the procedure and the written 2. Among the measures which the observations submitted pursuant to institutions of the Community have Article 20 of the Protocol on the Statute adopted in order to reduce these stocks is of the Court of Justice of the EEC may Council Regulation (EEC) No 563/76 of be summarized as follows: 15 March 1976 on the compulsory purchase of skimmed-milk powder held by intervention agencies for use in I — Facts and procedure feeding-stuffs (OJ L 67, p. 18).

1. The common organization of the That regulation imposed an obligation to market in milk and milk products purchase skimmed-milk powder held by provides for a system of prices based intervention agencies for use in inter alia on a target price for milk as feeding-stuffs for animals other than well as on intervention prices fixed young calves (Article 1). mainly for butter and skimmed-milk powder. In order to ensure compliance with this obligation, the grant of aid for certain Despite this price system, the vegetable foods (colza and rape seeds, Community is experiencing a surplus of soya beans etc.) is made subject to the milk which takes the form, in particular, provision of a security or the of the accumulation of considerable presentation of a document, of standard intervention stocks of skimmed-milk Community form, made out by the powder. competent authority of the Member State

In the case of contracts concluded before 4. By order of 8 September 1976 the the date of entry into force of the Landgericht stayed the proceedings and regulation, the successive buyers of the referred to the Court of Justice under products referred to in Articles 2 and 3 Article 177 of the EEC Treaty for a or of protein products processed preliminary ruling on the question therefrom are to bear the burden of the 'whether Regulation (EEC) No 563/76 is valid in law. costs arising under the arrangements laid down in the regulation (Article 5). 5. The defendant in the main action contended, inter alia, before the The regulation, which entered into force Landgericht that it must be denied that on 15 March 1976, was applied until 31 Regulation (EEC) No 563/76 increases October 1976 (Article 11). agricultural productivity, ensures the rational development of agricultural 3. The applicant in the main action production and is likely to stabilize runs a concentrated feeding-stuffs factory markets (Article 39 (1) (a) and (c) of the and obtains for the defendant in the Treaty). Skimmed-milk powder is main action, which operates a battery approximately six times as expensive as hen unit, the feeding-stuffs which the soya meal as a source of protein. Because latter needs for its undertaking. of the obligation to purchase skimmed milk the production of feeding-stuffs is In their contracts the parties in the main made considerably more expensive. The action provided that the increase in the victims are certain sectors of agriculture price of raw materials used in the which are unable to pass on the increase composition of feeding-stuffs as a result in price of feeding-stuffs to their own of national or 'supranational' measures prices. should be borne by the purchaser. The obligation to purchase skimmed The raw materials which are mainly used milk creates disparities in the market. in the composition of the product which The feeding-stuffs industry is compelled the applicant in the main action delivers to mix in expensive skimmed-milk to the defendant in the main action are powder although the protein maize and soya meal. The applicant in requirements can .be covered in the form the main action obtains these two main of plant protein at incomparably lower basic components from different costs.

powder is sold for approximately DM Furthermore no factual links exist 150. On the open market the only prices between those who benefit and those that could be obtained would be those who bear the burden. The persons for comparable plant protein, that is, about DM 50 per 100 kg. The benefited by an obligation to purchase intervention agencies would therefore skimmed-milk powder are milk have to bear a loss of approximately DM producers who are guaranteed 100 per 100 kg. This loss is being saved intervention prices for their products. In by introducing compulsory mixture with this way milk producers are given skimmed milk. This method has the preferential treatment at the expense of practical effect of introducing a European feeding-stuff producers and livestock owners. There are no factual reasons for Communities' tax. This is contrary to the principles of the EEC Treaty, in giving milk producers preferential particular the financial provisions treatment at the expense of livestock owners. contained therein (Article 199 et seq. of the EEC Treaty). As Regulation (EEC) No 563/76 is illegal the claim based on it must be Regulation (EEC) No 563/76 also unsuccessful. conflicts with the Grundgesetz (basic law), in particular Article 12. Laying 6. The validity of Regulation (EEC) No down an obligation to purchase which 563/76 is also the central issue in the was previously unknown in German applications for compensation which are economic law and in the common the subject of Joined Cases 83 and 94/76 organization of the agricultural markets and 4 and 15/77, Bayerische HNL within the European Communities Vermebrungsbetriebe GmbH & Co. KG conflicts with the right to engage freely and Others v Council and Commission, in an occupation. The imposition of and of the references for a preliminary demands on individuals is only ruling which gave rise to Case 116/76, permissible if the principle of Granaria BV. v Hoofdproduktschap proportionality is complied with and if voor Akkerbouwprodukten and there exists a factual connexion between Produktschap voor Margarine, Vetten en those who benefit and those who bear Olie'n and of Joined Cases 119 and the burden. 120/76, Kurt A. Becher v Hauptzollamt Bremen-Nord and Olmühle AG v The principle of proportionality is only Hauptzollamt Hamburg-Waltershof. complied with if the objective pursued by Regulation (EEC) No 563/76, namely 7. The order of the Landgericht the reduction of the stocks of Oldenburg was received at the Court skimmed-milk powder, could not be Registry on 2 December 1976. achieved by other less burdensome measures. An obligation to purchase is Pursuant to Article 20 of the Protocol on not necessary in order to attain the the Statute of the Court of Justice of objectives of the regulation. The stocks of the EEC, written observations were skimmed-milk powder could also be submitted by the Council, represented by reduced by offering them for sale at its Legal Adviser, Bernhard Schloh, competitive prices which are in acting as Agent, and by the Commission, accordance with market conditions. This represented by its Legal Adviser, Peter would necessarily entail financial losses Gilsdorf, also acting as Agent.

Upon hearing the report of the security designed to ensure that the Judge-Rapporteur and the views of the obligation to purchase skimmed-milk Advocate-General, the Court decided to powder is complied with. The provision open the oral procedure without any of a security serves to enforce this preparatory inquiry. obligation. The Court has, in previous cases, already had to consider similar arrangements for security and has II — Written observations sub declared them to be lawful. mitted to the Court

The submissions made (1) of the Treaty. It is permissible for the on this aspect by the defendant in the Council to give temporary priority to one main action may however be interpreted or more of the objectives listed. In the as indicating its desire that the Court event the Council was right to grant should consider whether the regulation at priority to the objective laid down in issue may not conflict with certain subparagraph (c), namely 'to stabilize fundamental rights. These rights form an markets. Moreover Regulation (EEC) No integral part of the general principles of 563/76 must be viewed in the general law, the observance of which the Court context of the decisions on prices ensures: judgment of 14 May 1974 in adopted by the Council for the 1976/77 Case 4/73, Nold v Commission [1974]

of Article 40 (3) of the Treaty. In of room for manoeuvre in deciding principle, the obligation to purchase whether the legislative measure skimmed-milk powder covers all those concerned, viewed in its context, is in the who use protein for feeding-stuffs, circumstances proportionate to the namely poultry-farmers and swine- and objective pursued. cattle-breeders, the latter for example using protein foods as a supplement for In the present case the contested cattle-feed. regulation restricts neither the freedom to choose an occupation nor the freedom to (c) According to the Council there is, in engage in it. The obligation to purchase this case, no question of creating a was, on the other hand, laid down by the Community tax but of introducing a legislature for reasons of public interest.

purpose since, if it had not been for the In any case, it is impossible to carry out obligation laid down, it would have been an appraisal of the legality of general impossible for the surplus to be policy by virtue of which the contested absorbed. Accordingly, the object of the measure was adopted on the basis of a rules is proportionate to the means retrospective review of the extent to employed. which it was successful; in terms of the law, it is enough that when a measure is In consequence the Council does not promulgated it does not appear consider that Regulation (EEC) No manifestly unsuitable for the purpose of 563/76 has infringed fundamental rights. attaining the objective in view. The rules at issue are the result of (e) As regards the statement by the defendant in the main action that the price maintenance policy and additives of iron and copper prescribed accordingly help to increase the for the denaturing of skimmed-milk individual earnings of persons engaged in powder are contrary to German law, the agriculture (Article 39 (1) (b)). Council again comments in this Above all, the contested measure accords connexion that the Court cannot with the object of stabilization of the determine the compatibility of market (Article 39 (1) (c)). Any Community law with national law. consideration of it from this point of view must have regard to the market in 2. (a) As regards the alleged milk as a whole. It is very difficult to infringement of Article 39 (1) of the restore a satisfactory balance between Treaty, the Commission states that, in supply and demand. In consequence, the view of the very wide wording of the Community institutions must be able, objectives listed in this article and their on a provisional basis, to employ relationship with each other, it is only in unorthodox measures in so far as they are extreme cases that it is possible to essential for the improvement of outlets. establish that rules promulgated by a Community institution are clearly As regards the submissions based on outside the scope of those objectives. The Article 39, the Commission makes the Court has already declared that those general comment that the measure objectives cannot always in practice be adopted under Regulation (EEC) No pursued simultaneously and that the 563/76 falls within the general scope Community institutions may accordingly of the objective provided for in allow any one of them temporary subparagraphs (a) to (c) of Article 39 (1) priority. in so far as it is viewed in a more general context and attention is not confined to The question whether the rules accord its isolated effect on the processing with the objective laid down in Article industry. 39 (1) (a) involves a complicated economic value-judgment implying wide (b) As regards the alleged infringement powers of discretion: for the purposes of of the principle of non-discrimination,

claiming that Community rules are As there is no other less costly means contrary to the fundamental rights of purchasing feeding-stuffs it may inherent in Community law or contrary moreover be concluded that in principle to safeguards treated on the same basis as the cost must be passed on to the fundamental rights. purchaser and the ultimate consumer. As the Court held in Case 4/73, Nold v There is no legal principle which, in Commission, the right freely to engage in such circumstances, requires all taxpayers an occupation is protected in the to pay the additional cost arising from Member States and consequently also in the market policy. There can be even Community law 'subject always to limitations laid down in accordance with less question of special, arbitrary or discriminatory treatment of a particular the public interest'. group of traders. In the present case the general principle of proportionality must be the only test (c) As regards the alleged infringement in determining whether the infringement of financing rules, the Commission of this fundamental right serves a states that it is incorrect to compare the purpose which is in itself acceptable, compulsory purchase arrangements with whether it is such as to enable this a Community tax because it enables objective to be attained and whether it economies to be made. The object of the does not constitute an arbitrary and arrangements is not in any event to intolerable burden. increase the Communities' own resources but to absorb the skimmed-milk powder Referring in this connexion to its surpluses. Moreover, the Communities' observations on the principle of own resources are used without non-discrimination the Commission

force of the regulation in no way detracts The Court had invited the Commission from the efficacy of the regulation since and the Council to supply at the hearing the increase in stocks during that period information and suitable explanations was in any case less than the quantities concerning the costs of dehydrating which it was possible to dispose of as a skimmed milk and the costs of result of the regulation. denaturing necessitated by the compulsory use of skimmed-milk The Commission states that the various powder in feeding-stuffs compared with the value of this milk as animal feed. formulae for denaturing provided for under Commission Regulation (EEC) No 753/76 of 31 March 1976 laying down In Joined Cases 83 and 94/76 and 4 and detailed rules for the sale of 15/77, the applicants replied that the skimmed-milk powder for use in animal three factors, dehydration, storage and feed pursuant to Regulation (EEC) No denaturing, represented a total of about 563/76 (OJ L 88, p. 1), which has 27 units of account or DM 95 per 100 meanwhile been in part amended by kg, and that the value of 100 kg of Regulations (EEC) Nos 1131/76 of 14 skimmed-milk powder as animal feed May 1976 (OJ L 127, p. 42) and 1409/76 was roughly between DM 50 and 65. of 18 June 1976 (OJ L 158, p. 29), provide ample opportunities of carrying The Commission replied that the cost of out denaturing operations in conformity manufacturing skimmed-milk powder with national provisions applicable to was on average 15 u.a. per 100 kg. The feeding-stuffs. denaturing costs involved in the scheme in question are between 1 and 3 u.a. per The compulsory purchase system was, 100 kg according to the denaturing moreover, also necessary because there method. The value of skimmed-milk was no other way of quickly achieving powder as animal feed varies according the desired result. to whether the product is used for feeding calves or for swine and poultry. In conclusion, the Commission submits In the first case the supply price fixed by that the Court's reply to the court the Community for this type of use making the reference should be that determines the price on the market. For consideration of the questions raised has the period in question the supply price disclosed no factor of such a kind as to was 52 u.a. per 100 kg of skimmed-milk affect the validity of Regulation (EEC) powder. In the second case the market No 563/76. price of the product is fixed on the basis of its value as animal feed compared with substitute products and, in particular, of the price of soya oil cake. During the III — Oral procedure time when the contested regulation applied, the price of soya oil cake was The Council, represented by its Legal about 18 u.a. per 100 kg. The price of Adviser, B. Schloh, acting as Agent, and soya at the present time is 25 u.a. per the Commission, represented by its Legal 100 kg. Adviser, Peter Gilsdorf, acting as Agent, submitted oral observations at the The Advocate General delivered his hearing on 3 May 1977. opinion at the hearing on 7 June 1977.

2 Regulation (EEC) No 563/76 was promulgated at a time when the stocks of skimmed-milk powder bought in by the intervention agencies pursuant to Regulation (EEC) No 804/68 of the Council of 27 June 1968 on the common organization of the market in milk and milk products (OJ English Special Edition 1968, p. 176) had reached considerable proportions and were continuing to increase despite the measures adopted by the Community institutions to curb the tendency towards over-production of milk and to increase the sale of skimmed-milk powder. The system established by Regulation (EEC) No 563/76 the application of which was not extended beyond the end of the original period of application, which expired on 31 October 1976, was designed to reduce stocks through the increased use in feeding-stuffs of the protein contained in skimmed-milk powder. To this end the regulation made the grant of the aids provided for certain vegetable protein products as well as the free circulation in the Community of certain imported animal feed products subject to the obligation to purchase specified quantities of skimmed-milk powder. In order to ensure that this obligation was fulfilled the grant of aid and free circulation were subject to the provision of a security or the production, on the prescribed form, of evidence of the purchase and of the denaturing of the prescribed quantities of skimmed-milk powder.

3 Under Article 1 of Commission Regulation (EEC) No 753/76 of 31 March 1976 laying down detailed rules for the sale of skimmed-milk powder for

JUDGMENT OF 5. 7. 1977 - CASE 114/76

5 The validity of these arrangements has been contested on grounds of conflict in particular with the objectives of the common agricultural policy as defined in Article 39 of the Treaty, the prohibition of discrimination laid down in the second subparagraph of Article 40 (3) and the principle of proportionality between the means employed and the end in view. Because of the close connexion between these grounds of complaint, it will be appropriate to consider them together.

6 Under Article 39, the objectives of the common agricultural policy are to be the rational development of agricultural production, the assurance of a fair standard of living for the whole of the agricultural community, the stabilization of markets and the availability of supplies to consumers at reasonable prices. Although Article 39 thus enables the common agricultural policy to be defined in terms of a wide choice of measures involving guidance

BELA-MÜHLE v GROWS-FARM

or intervention, the fact nevertheless remains that the second subparagraph of Article 40 (3) provides that the common organization of the agricultural markets shall be limited to pursuit of the objectives set out in Article 39. Furthermore, the same subparagraph lays down that the common organization of the markets 'shall exclude any discrimination between producers or consumers within the Community'. Thus the statement of the objectives contained in Article 39, taken together with the rules in the second subparagraph of Article 40 (3), supplies both positive and negative criteria by which the legality of the measures adopted in this matter may be ap­ praised.

On those grounds,

THE COURT,

in answer to the question referred to it by the Landgericht Oldenburg by order of 8 September 1976, hereby rules:

Council Regulation (EEC) No 563/76 of 15 March 1976 on the compulsory purchase of skimmed-milk powder held by intervention agencies for use in feeding-stuffs is null and void.

Kutscher Donner Pescatore Mertens de Wilmars Sørensen

Mackenzie Stuart O'Keeffe Bosco Touffait

1 — Translated from the Italian.