C-124/76

the fact that the Court, in proceedings

In Joined Cases 124/76 and 20/77

REFERENCE to the Court under Article 177 of the EEC Treaty by the Tribunal Administratif (Administrative Court), Nancy, for a preliminary ruling in the

action (Case 124/76) pending before that court between

SA MOULINS ET HUILERIES DE PONT-A-MOUSSON , (France)

and

the market in cereals (OJ L 72, p. 14) and of Regulation (EEC) No 2727/75 of the Council of 29 October 1975 on the common organization of the market

in cereals (OJ L 281, p. 1) in that they provide for the abolition of the

production refund previously established for the benefit of manufacturers of

maize meal for the brewing industry,

MOULINS PONT-À-MOUSSON v OFFICE INTERPROFESSIONNEL DES CÉRÉALES

THE COURT

The facts of the case, the course of the numerous outlets for the products of the

procedure and the written observations starch industry (starch, gluten, glucose, submitted under Article 20 of the Statute dextrose etc.). The starch industry is of the Court of Justice of the EEC may accordingly in competition not only with be summarized as follows: the maize industry but also with those

sectors of the chemical industry which

manufacture oil-based substitute

I - Facts and procedure products.

1. The manufacture of beer involves the 3. Regulation No 19 of the Council of use, in addition to malt, of starch 4 April 1962 on the progressive products derived from coarse-grained establishment of the common cereals capable of being processed into organization of the market in cereals (JO alcohol during fermentation: maize of 20. 4. 1962, p. 933), introduced a groats and maize meal (hereinafter called system of levies for certain cereal gritz) manufactured by the maize Article 24 products. of the regulation industry, starch produced by the starch provided however that the Council might manufacturing industry, and other starch adopt measures derogating from that products (broken rice, wheat flour etc.). system.

'Whereas because of the special situation production refunds should also be in in in the latter products.'

on the market starches and granted respect of

particular the need for that industry to

keep prices competitive with those for Article 11 (1) of the regulation reads: substitute products, it is necessary by way '1. A production refund shall be granted: of derogation from the provisions ... of (a) for maize and common wheat

Regulation No 19 of the Council, to used by the starch industry for the ensure by means of a production refund manufacture of starch and

that basic products used by the the quellmehl;

system set up by Regulation No 19 has industry for the manufacture of groats

on the one hand caused maize groats and and maize meal for the brewing industry meal to increase in cost and has on the should be fixed at a levelallowing a other hand given rise to difficulties as balance to be achieved between brewery regards their use in the brewing industry, prices for supplies of maize starch, on

by reason of the competition from the one hand, and groats and maize meal products with a similar use; whereas the on the other; whereas this objective will

grant of a production refund is a suitable be achieved by fixing the refund for remedy for this situation and whereas maize for the manufacture of groats and

such refund should be authorized, in maize meal at the same level as the derogation from Regulation No 19; refund for maize for the manufacture of starch.'

whereas, because of its nature, such temporary.'

regulation it is inter alia stated: Regulation No 138/67/EEC was replaced

by Regulation No 367/67/EEC of the

'Whereas. . because of the Council of 25 July 1967 fixing interchangeability of starches with production refunds on maize groats and

quellmehl and maize groats and meal, meal and broken rice used in the

MOULINS PONT-À-MOUSSON v OFFICE INTERPROFESSIONNEL DES CÉRÉALES

brewing industry (OJ, English Special by the brewing industry (OJ C 31, 1975, Edition 1967, p. 216) which in its sole p. 26). recital declared inter alia that In adopting Regulation (EEC) No 665/75 '... the production refund on maize used of 4 March 1975, which took effect from

Subsequent regulations amending '... it no longer appears necessary to Regulation No 120/67/EEC and those grant a refund for the production of

fixing the amount of the production maize groats and meal for use by the refund maintained the parity between brewing industry in the manufacture of starch and gritz. beer.'

Accordingly Regulation (EEC) No Article 3 of the regulation is accordingly 1132/74 of the Council of 29 April 1974 worded as follows: on production refunds in the cereals and '1. A production refund may be granted rice sectors (OJ L 128, p. 24) had, in in a single regulation all (a) for maize and common wheat consolidating used in the Community for the the provisions relating to production manufacture of starch; refunds in the cereals and rice sectors, maintained a system which was the same (b) for potato starch; for starch and gritz. But the effect of the (c) for maize groats and meal (gritz) used in the Community for the regulation was to reduce to 24-60 units of account per metric ton [hereinafter called manufacture of glucose by the

process known as 'direct 'tonne'] the production refund for maize hydrolysis.'

and common wheat used for the

manufacture of starch and it no longer In consequence, no provision was made provided for a production refund for for a production refund in the case of quellmehl. gritz by Regulation (EEC) No 1955/75 of the Council of 22 July 1975 on Regulation (EEC) No 3113/74 of the production refunds in the cereals and Council of 9 December 1974 amending rice sectors (OJ L 200, 1975, p. 1) which Regulation (EEC) No 1132/74 on replaced Regulation (EEC) No 1132/74. production refunds in the cereals and In addition, that regulation provided for rice sectors (OJ, L 332, 1974 p. 1) had a further reduction in the amount of the resulted in the reduction to 15-55 u. a. refund granted for maize used for the per tonne of the refund granted for manufacture of starch, which it fixed at maize used in the manufacture of starch ten units of account per tonne. and for gritz.

In June 1975, the Commission once adopting the contested decisions it had again proposed to the Council that merely applied the relevant Community production refunds should be restored in provisions.

the case of maize groats and meal for use by the brewing industry (OJ C 159, 1975, 5. Holding that the cases raised

p. 9). It was not until July 1976 that this questions of interpretation of

proposal was considered by the Council, Community law, the Tribunal which decided not to go on with it. This Administratif, Nancy, and the Tribunal decision resulted in Regulation (EEC) No Administratif, Chalons-sur-Marne, by 1862/76 of 27 July 1976 amending orders dated respectively 25 November Regulation (EEC) No 2742/75 on 1976 and 1 February 1977, stayed the

production refunds in the cereals and proceedings and requested the Court of

rice (OJ L 206, 1975, p. 3). But sectors Justice under Article 177 of the EEC Regulation (EEC) No 1862/76 raised the Treaty to give a preliminary ruling: refund to 14 u. a. per tonne.

grant of production refunds for gritz. In accordance with Article 20 of the Protocol on the Statute of the Court of The plaintiffs in the main actions Justice of the EEC, written observations brought the present proceedings before in were submitted by the plaintiffs the the Tribunal Administratif, Nancy, and main actions, represented by Guy the Tribunal Administratif, Châlons-sur- Lesourd, Advocate at the Conseil d'État Marne, against these decisions rejecting and the Cour de Cassation, Paris, and by the applications. Etienne Jaudel, Advocate at the Cour d'Appel, Paris, by the Council, Before those courts, the plaintiffs in the represented Daniel Vignes, Director by main action urged in particular that of its Legal Service, acting as Agent, Regulation (EEC) No 665/75 had not assisted by Yves Crétien, a member of been adopted in accordance with the by the Commission, the said service, and procedure provided for in Article 43 of representedby its Legal Adviser, Richard the Treaty and that both that regulation Wainwright, acting as Agent, assisted by and Regulation (EEC) No 2727/75 were Jacques Delmoly, a member of the Legal contrary to the general principle of free Service. competition between undertakings in that they provided for the abolition of By order of 25 May 1977 the Court the production for gritz. decided to join the cases for the purposes refund of the procedure.

The defendant in the main actions After hearing the report of the contended that the applications should

be dismissed arguing inter alia that in Judge-Rapporteur and the views of the

claim that Regulation (EEC) No 665/75 attitude adopted by the member

concerned. is invalid in that it provides for the

abolition of the production refund for gritz. On the question whether the decisions of the Council were adopted unanimously, (a) In the first place the Council can in the plaintiffs the main actions are abolish the production refund for gritz content to suggest that the Court should

only in accordance with the provisions of see fit to require formal proof that the Articles 43 and 149 of the Treaty. As the decision was unanimous. proposal for a regulation drafted by the Commission in February 1975 did not

(b) Secondly, the plaintiffs in the main provide for the abolition of the refund actions point out that it is not the granted to the maize industry for gritz for the brewing industry, the Council had purpose of the actions to deny that the expediency of support measures is a the choice of only two alternatives: either matter for the Council's discretion. to adopt the draft drawn up by the Nevertheless the contested regulations Commission of to reject it. Under Article 149 of the Treaty, unanimity is required are arbitrary; they produce an unlawful

for it to be able to amend the proposal disparity between two products which are manufactured from the same raw and adopt a wording which has not material and put to the same use. In this received the approval of the Commission. connexion the applicants point to Article 2 of the Treaty, under the terms of which Since there is nothing in any official publication to show that, before the the Community shall have as one of its tasks to promote a harmonious decision of the Council which led to development of economic activities and a Regulation (EEC) No 665/75, the

starch and gritz but this balance was only other requirements, it is clear from that

fully established by Regulation No article and also from Article 29 of

120/67/EEC. The reason why this Regulation No 120/67/EEC that the

balance was only gradually achieved is Community authorities must comply that Articles 3 and 39 of the Treaty with the objectives referred to in Article provide for development to be gradual. 39 (1) of the Treaty, which include that Nevertheless once this balance is of stabilizing markets.

achieved there is no authority in the

Treaty for a sudden step backwards. It is also the view of the Court that the

of the Treaty and with Article 40 thereof. as starch.

Moreover, the recitals in the preamble to Regulation No 120/67/EEC make it (e) Regulations (EEC) Nos 665/75, quite clear that the production refund for 2727/75 and 1862/76 created a

gritz would remove any discrimination fundamental disparity between the starch between starch manufacturers and gritz industry and the maize industry, affecting manufactures with the result that, even if two competing products which, at the

this measure was not immediately same stage of marketing or production, because the to develop have, from the consumers'

adopted of need point of view, the common agricultural policy by similar properties and answer the same

degrees, the Council could, without needs. But while, even for those of its flying in the face of the wording of the products which could be used in Treaty itself, no longer compromise the brewing, the starch industry continued to rule of equality of treatment which from receive a discretionary production refund, then on existed between the two there was no refund at all for the maize

MOULINS PONT-À-MOUSSON v OFFICE INTERPROFESSIONNEL DES CÉRÉALES

intra-Community competition whether therefore, quellmehl can compete with

this is between the nationals of the starches but it cannot be used in the

various States in the Community, brewing industry for the manufacture of

between the various competing branches beer. of Community industry or between undertakings. Both the recital in the (g) With regard to the Council's preamble to Regulation No 367/67/EEC observation in Joined Cases 64 and

and the Commission's proposal of June 113/76 that there is a complicated

This is clear from the Commission's starch products. On the other hand, the proposals of June 1975, from the report plaintiffs are right in maintaining that no of 13 October 1975 of the Committee on discriminatory measure can be permitted Agriculture of the European Parliament in respect of the grant of a production

regarding the proposal (Working refund on maize used in the Community Document No 303/75), and from the for the manufacture of beer, whether the report of the debates of the European maize is processed by the starch industry Parliament of 19 December 1975 (Annex or by the maize industry. OJ: Debates of the EP No 197 of

December 1975). (h) The plaintiffs in the main actions

claim that the Court should declare The plaintiffs in the main actions state Regulations (EEC) No 665/75 and

that, in consequence, the Court cannot 2727/75 to be out of order and void in fail to declare illegal regulations of the that they provide for the abolition of the Council which arbitrarily create disparity production refund on maize previously of treatment between the maize industry established for the benefit of

and the starch industry in respect of manufacturers of gritz used by the

from an erroneous reading of the words procedural irregularity the Council points of the tenth recital in the preamble to out that, when Regulation (EEC) No Regulations No 120/67/EEC. It is clear 665/75 was adopted in the course of the

from this recital that, on some markets, discussions at the Council, the

there can be competition between Commission changed its original

quellmehl and starches and on other proposal and proposed that the

markets competition between gritz and production refund for gritz should be starches. As regards some outlets, abolished. Moreover the Council adopted

JUDGMENT OF 19. 10. 1977 - JOINED CASES 124/76 AND 20/77

The same applies to Article 92 et seq. of meal on the other. This situation was

the Treaty relating to aid granted by the further complicated a few weeks later States. In any case the principle of owing to the addition of a fourth non-discrimination has nothing to do product, broken rice, which was

with regulations on competition between assimilated to gritz by Regulation No undertakings. 367/67/EEC. Regulation No 120/67/EEC had already indicated that this extension

As for Article 42 of the Treaty, the to other products of the system of

Council recalls that its object is to production refunds applicable to the first suspend the application of the provisions group of products results from 'applying of the Treaty relating to the rules on the system of levies and common prices,

competition but nevertheless it that is to say, from the imbalance and

by Articles 85 to 94. The indication in it gave rise to Regulation (EEC) No subparagraphs (a) and (b) of the aids 1132/74. As world prices have risen, the which the Council may, in particular, magnitude of the refunds is no longer authorize to be granted is evidence of economically justified, and the

that intention. institutions are disturbed by the excessive financial burden to which the system

(c) The Council rejects the notion that, gives rise.

by abolishing the refund for gritz while maintaining it for maize starch, it In consequence the Council has infringed a non-discrimination rule and gradually reduced production refunds, put an end to the existing parity between made them discretionary and even

the starch industry and the maize abolished them in the case of certain

industry without justification. products like quellmehl and gritz.

the refund for quellmehl was abolished non-discrimination between industries and this resulted in its abolition for gritz. and, on the other hand, to the need to

It was the recognition that there existed a preserve the financial advantages

closer economic relationship between acquired by one branch of industry so

quellmehl and gritz than between long as those advantages are granted to

quellmehl and starch for brewing which another branch competing in the same

led to the abolition of the refund granted field. There are no such rules and, if they for gritz. existed, they would appreciably restrict

consideration which the Council had to As regards the adoption of Regulation take into account No 2727/75 Commission (EEC) the

Nevertheless, the outcome of explains that, as this was a consolidating pending regulation, it in fact did no more than this comprehensive examination, it repeat the provisions which were in force considered it best to maintain the refund on that date; Article 11 of its for maize starch for the time being and it (unpublished) proposal dated 12 June seems difficult to regard such 1975 was therefore consistent with circumspection as amounting to Article 11 Regulation No 120/67/EEC, of contravention of a rule of law: judgment

of the Court of 2 June 1976, Joined as amended by Regulation (EEC) No 665/75, referred to above. There was Cases 56 to 60/74, Kampffmeyer therefore no amendment of the Mühlenvereinigung v Council and

Commission ([1976 ECR 711). Commission's proposal on that point

The arguments advanced by the plaintiffs (b) As regards the alleged breach by in the main actions before the courts Regulations (EEC) Nos 665/75 and

JUDGMENT OF 19. 10. 1977 - JOINED CASES 124/76 AND 20/77

the breweries rose from 87 946 tonnes in by the Community legislature: exclusion of quellmehl from the list of products 1974/75 to 89 300 tonnes in 1975/76 and, secondly, there has since August qualifying for refund (Regulation (EEC) No 1125/74) and reduction in the 1975 been virtually no use of gritz amount of the refunds granted for maize instead of starch by the consuming for use in the manufacture of starch and industry. This last statement can be for gritz (Regulation (EEC) No 3113/74). explained by the investment outlay Such choices fall within the normal necessary to substitute starch for gritz in scope of the discretion which the the process of the manufacture of beer institutions of the Community are because starch requires a better filter system. Furthermore, gritz is more easily recognized as having for the purpose of the conduct of economic policy in handled than starch which, being a general and the control of the common powder, tends to 'stick'. agricultural policy in particular.

(d) The Commission is unable to agree (e) Finally the Commission suggests that the common agricultural policy that the plaintiffs in the main actions must in all circumstances comply with may be relying on a sort of 'prescriptive the principle of free competition, at least In right'

whereas the absence of such a 000 u.a/1 kg refund for maize groats and meal 120-98 threshold price maize — 10 u. a.

(gritz) intended for use by the refund

brewing industry in the manufacture 1-61 feed-conversion rate maize/starch of beer could, in the circumstances 194-78 likely to obtain, disturb the balance between the cost of supplying the Maize groats breweries with maize starch on the

one hand and maize groats and meal u.a./1 000 kg on the other; whereas therefore it 120-98 threshold price maize — 10 u. a.

appears necessary to provide for a refund

discretionary refund for production of 1-80 feed-conversion rate maize/groats

of any production refund for maize groats and significance concerning the meal for use by the brewing industry in interchangeability of the products the manufacture of beer strengthened the involved. competitive position of starch compared

with maize groats and meal to an extent 2. The Court also asked the parties and which would result in their use being the Council to comment before the

completely superseded by that of starch. hearing on the statistics showing that the supply of gritz by the French producers According to a working document to breweries rose from 87 946 tonnes in prepared by the staff of the Commission 1974/75 to 89 300 tonnes (+ 1-50 %) in the superiority of starch in the marketing 1975/76 whereas supplies to the brewing

JUDGMENT OF 19. 10. 1977 - JOINED CASES 124/76 AND 20/77

industry by millers in the north region breweries in the north region fell fell from 27 708 tonnes in 1974/75 to between the 1974/75 and the 1975/76 21 401 tonnes in 1975/76. marketing years whereas, overall, those of the French maize industry remained the The plaintiffs in the main actions same was not that the plaintiffs'

French expressed their agreement with these or German competitors had improved figures which reveal, over the whole of their share of gritz consumption in

concerned, regard should not be paid to and gave their replies to the questions

statistics of but only to national results put by the Court. the local results affecting the regions in

northern France because it is there that In so doing the parties made statements, the competition from starch is most inter alia, to the following effect: keenly felt since the only two maize starch manufacturers in France have their The plaintiffs in the main actions

factories in that region. As the conditions submitted statistical information to the

of competition cannot be assessed effect that the sales of starch to the

without taking comparative transport breweries rose from 1 500 tonnes during costs into account, the maize industries the 1974/75 marketing year to 6 500 established in the north and north-east tonnes during the 1975/76 marketing regions and supplying the breweries in year and reached 8 500 tonnes during the those regions bore the main brunt of the 1976/77 marketing year.

with the figures in question.

In reply to a question put by the Court it The question was also asked whether the explained that it had never claimed reason why supplies of gritz to the that gritz and quellmehl were

MOULINS PONT-À-MOUSSON v OFFICE INTERPROFESSIONNEL DES CÉRÉALES

interchangeable. Any reference it may marketing years. Finally, it stated that

have made to a relationship between there had been a sharp rise in imports quellmehl and gritz was concerned with since 1972. a legal relationship and not a trade The Commission pointed out that maize relationship; the two products form part

of the same group. starch supplies to the brewing industry had fallen since 1970/71:

amending Regulation No 120/67/EEC on the common organization of the

market in cereals (OJ L 72 of 20.3.1975, p. 14) and Regulation (EEC) No 2727/75 of 29 October 1975 on the common organization of the market in cereals (OJ L 281 of 1.11.1975, p. 1) in that they provide for the abolition of the production refund previously established for the benefit of manufacturers

of maize groats and meal for the brewing industry.

2 Since the questions submitted by the two national courts are identical in content and purpose, it is proper to join the cases for the purposes of the

judgment.

3 The questions were referred in connexion with proceedings for payment of a production refund for maize for the brewing industry which were brought against the competent national authorities by manufacturers of maize groats

5 The first recital in the preamble to Regulation No 11/65/EEC states that the

refund was introduced because of the difficulties created as regards the use of

maize groats and meal in the brewing industry, by reason of the competition from products with a similar use.

6 Regulation No 120/67/EEC gave the same reason when, in its tenth recital, it referred to the possibility of interchangeability of starches with maize and

groats and meal.

7 With the object of achieving a balance between brewery prices for supplies of maize starch, on the one hand and of maize groats and meal on the other, Regulation No 138/67/EEC of the Council of 13 June 1967 (JO of 22.6.1967, p. 2404) fixing the production refund in respect of maize groats and meal used by the brewing industry fixed the refunds for the two products at the same level.

preamble to Regulation (EEC) No 665/75 was that, it no longer appears

necessary to grant a refund for the production of maize groats and meal for use by the brewing industry in the manufacture of beer'.

to By virtue of the possibility provided for by the new wording of Article 11 of

Regulation No 120/67/EEC, a production refund for maize for use in the

manufacture of starch was fixed by Regulation (EEC) No 1955/75 of the

MOUUNS PONT-À-MOUSSON v OFFICE INTERPROFESSIONNEL DES CÉRÉALES

Council on 20 June 1975 a proposal for a regulation which would reintroduce the refund for maize groats and meal for the brewing industry on the ground that the absence of such a refund 'could, in the circumstances likely to obtain, disturb the balance between the cost of supplying the brewing industry with hand, and with maize groats and meal on the other'

maize starch on the one

(OJ C 159 of 16.7.1975, p. 9).

13 Nothing came of the proposal submitted to the Council on these lines.

u The second subparagraph of Article 40 (3) of the Treaty provides that the

common organization of agricultural markets 'shall exclude any discrimination between producers or consumers within the Community'.

18 It must therefore be ascertained whether maize groats and meal on the one

hand and maize starch on the other are in comparable situations, in particular

in the sense that starch can be substituted for maize groats and meal in the

production of beer and that the choice of the brewing industry between the two products mainly depends upon the cost of supply.

19 In this connexion the Council's representative before the Court denied the

existence of such a relationship between the two products.

that regulation in conjunction with Regulation (EEC) No 1955/75, the refund was maintained for maize starch amounts to a disregard of the principle of

equality.

24 In the particular circumstances of the case, however, this finding of illegality does not inevitably involve a declaration that a provision of Regulation (EEC) No .665/75 is invalid.

25 It must first of all be borne in mind that the amendment of Article 11 of

Regulation No 120/67/EEC effected by Article 3 of Regulation (EEC) No

MOULINS PONT-À-MOUSSON v OFFICE INTERPROFESSIONNEL DES CÉRÉALES

120/67/EEC, is incompatibile with the principle of equality and that it is for the competent institutions of the Community to adopt the necessary measures to correct this incompatibility.

29 The need for a reply to this effect to the questions asked is borne out by the existence of several courses of action which would enable the two products in question once again to be treated equally and to make good any damage sustained by those concerned and by the fact that it is for the institutions reponsible for the common agricultural policy to assess the economic and

political considerations on which this choice of action depends.

Costs

30 The costs incurred by the Council and the Commission of the European

Communities, which have submitted observations to the Court, are not

THE COURT

in answer to the questions referred to it by the Tribunaux Administratifs, Nancy and Châlons-sur-Marne, by orders of 25 November 1976 and

1 February 1977, hereby rules:

1. The provisions of Article 11 of Regulation No 120/67­ /EEC of

the Council of 13 June 1967 as worded with effect from 1 August 1975 following the amendment of made by Article 3 Regulation (EEC) No 665/75 of the Council of 4 March 1975

and repeated in Regulation (EEC) No 2727/75 of the Council of

agricultural policy to adopt the measures necessary to correct

this incompatibility.

Kutscher Sørensen Bosco Donner Pescatore

Mertens de Wilmars Mackenzie Stuart O'Keeffe Touffait

Delivered in open court in Luxemburg on 19 October 1977.

A. Van Houtte H. Kutscher