C-125/77

JUDGMENT OF THE COURT OF 25 OCTOBER 1978 <apnote>1</apnote>

Koninklijke Scholten-Honig N.V. and de Verenigde Zetmeelbedrijven "De Bijenkorf” B.V. v Hoofdproduktschap voor Akkerbouwprodukten (preliminary ruling requested by the College van Beroep voor het Bedrijfsleven)

"Isoglucose"

Сам 125/77

1. Measure adopted by an institution — Regulation — Statement of reasons on which based — Reference to legislative context (EEC Treaty, Art. 190)

2. Agriculture — Common organization of the market — Discrimination between producers or consumers within the Community — Concept (EEC Treaty, second subparagraph ofArt. 40 (3))

Koninklijke Scholten-Honig N.V. and De Verenigde Zetmeelbedrijven "De Bijenkorf" B.V.

and

Hoofdproduktschap voor Akkerbouwprodukten,

on the validity of Council Regulation (EEC) No 1862/76 of 27 July 1976 (Official Journal 1976, L 206, p. 3) amending Regulation (EEC) No 2742/75 on production refunds in the cereals and rice sectors and of Commission Regulation (EEC) No 2158/76 of 31 August 1976 laying down rules for the application of Regulation (EEC) No 2742/75 (Official Journal 1976, L 241, p. 21),

THE COURT,

composed of: H. Kutscher, President, J. Menens de Wilmars and Lord Mackenzie Stuart (Presidents of Chambers), A. M. Donner, P. Pescatore, M. Sørensen, A. O'Keeffe, G. Bosco and A. Touffait, Judges,

2. Community legislation 1976/1977 marketing year, particularly Council Regulation (EEC) No 2727/75 as a result of the application for that of 29 October 1975 on the common marketing year of common prices for organization of the market in cereals cereals and rice, it is necessary to (Official Journal 1975, L 281, p. 1) increase the production refunds; ... stated, in the preamble, that " in view of however, given the objectives of the the special market situation for cereal production refund system, such an increase should not be retained in the starch, pouto starch and glucose produced by the 'direct hydrolysis' case of products used in the manu­ process it may prove necessary to facture of glucose having a high fructose content; ... the best method of provide for a production refund of such a nature that the basic products used by implementing a measure of this type is this industry can be made available to it to provide for recovery from the manu­ facturers concerned of the amount of at a lower price than that resulting from the application of the system of levies the increase in production refunds and common prices", and provided in according to the product used." Article 11 that: Under Article 1 the refunds are increased. "1. A production refund may be granted : However, under Article 2 of that regu­ (a) for maize and common wheat lation a new article, Article 5 a, is used in the Community for the added to Regulation (EEC) No manufacture of starch; 2742/75, reducing the production refund for only one product processed (b) for potato starch; from starch, glucose having a high (c) for maize groats and meal used fructose content. In fact the amount of in the Community for the manu­ the refund for starch processed into that facture of glucose by direct product is maintained at the level of hydrolysis; that of the previous marketing year and 2. . . . is totally abolished as from the 1977/­ 1978 marketing year. 3. The Council, acting by a qualified Under Article 5 a (3) the Member States majority on a proposal from the must recover from manufacturers of Commission, shall adopt rules for the application of this article and fix glucose having a high fructose content the difference between the amount of the amount of the production refund." the production refund for starch processed into glucose having a high fructose content and the amount for In application of that provision, the Council, by means of Regulation (EEC) starch used for any other purpose. No 2742/75 of 29 October 1975 By Regulation (EEC) No 2158/76 of 31 (Official Journal L 281, p. 57), adopted August 1976 (Official Journal 1976, L implementing rules and fixed the 241, p. 21) laying down rules for the various amounts of the production application of Regulation (EEC) No refunds. 2742/75, the Commission adopted By Regulation (EEC) No 1862/76 of 27 implementing provisions. July 1976 (Official Journal 1976, L 206, J. The main action p. 3) the Council amended Regulation No 2742/75, it being stated in the Koninklijke Scholten-Honig N.V. and recital in the preamble to that regulation De Verenigde Zetmeelbedrijven "De that: "... in view of the situation which Bijenkorf' B.V. companies incorporated will exist as from the beginning of the under Netherlands law, appealed to the

College van Beroep voor het not binding in whole or in part, Bedrijfsleven, The Hague, from a namely in so far as it makes decision of the Hoofdproduktschap provision for the said amendment? voor Akkerbouwprodukten, the 4. Have the Council and the Netherlands intervention agency, by Commission, by adopting Regu­ which that agency claimed from the lation (EEC) No 1862/76 and Regu­ companies, in pursuance of the lation (EEC) No 2158/76 provisions of Council Regulation (EEC) respectively, misused their powers No 1862/76 and its implementing regu­ in that, in adopting those regu­ lation, Commission Regulation (EEC) lations, they pursued objectives No 2158/76, the amount of Fl. other than those inherent in Regu­ 36 135.06 by way of levy relating to the lation (EEC) No 2727/75, parti­ processing, carried out during the cularly because by those regulations period from 1 August to 31 October they introduced the aforementioned 1976 inclusive, of maize starch into change in the system of production glucose having a high fructose content. refunds with the aim of helping the By decision of 12 October 1977 the sugar industry which aim was not College van Beroep voor het and is not proper to Regulation Bedrijfsleven stayed the proceedings on (EEC) No 2727/75 on the common appeal pending a preliminary ruling organization of the market in from the Court of Justice on the cereals? following questions: 5. Must Article 4 of Commission Regu­ "1. Must it be held that the reasons on lation (EEC) No 2158/76 be which Article 2 of Council Regu­ interpreted as meaning that, taking lation (EEC) No 1862/76 is based account of the provisions of Regu­ are not stated in accordance with lation (EEC) No 1862/76, those the requirements of Article 190 of refunds in respect of the manu­ the Treaty and if so does it follow facture of glucose with a high that Article 2 — Article 5a of fructose content which were Council Regulation (EEC) No granted in the period from 1 August 2742/75 — is not binding? to 3 September 1976, on which 2. Is the said Article 2 incompatible latter date the regulation entered with the principle of non-discrimi­ into force, may be recovered on the nation which is fundamental to the basis of the provisions of the said Treaty and which is set out, in regulation and those of Regulation particular, in Article 40 of the (EEC) No 1862/76, and if so, must Treaty and is Article 2 not binding it follow that Regulation (EEC) No for that reason? 2158/76 is not binding in whole or in part, namely in so far as it makes 3. Does Regulation (EEC) No 1862/76 contain an amendment to provision for the recovery of refunds as mentioned above?" the system of granting refunds to the starch industry, which The decision for reference was amendment, either of itself or because of the fact that it was registered at the Court on 19 October 1977. suddenly introduced into the aforementioned system which has On hearing the repon of the Judge- been applicable since 1967, is Rapporteur and the views of the incompatible with the principle of Advocate General the Court decided to legal certainty fundamental to the open the oral procedure without any Treaty and if so is that regulation preparatory inquiry.

II — Summary of the obser The system of production refunds goes vations submitted under back not only to competition with sub Article 20 of the Protocol stitution products within the Common on the Statute of the Court Market but also and above all to of Justice of the EEC competition with starch manufacture outside the Common Market. The Koninklijke Scholten-Honig N.V_, one of distinction made in the substitution the plaintifs in the main action, takes the system according to the end product of view that in adopting Regulation No starch manufacture thus constitutes a 1862/76 and Regulation No 2158/76 policy change of great importance for the Council and the Commission the industry. committed a breach of the following However, the reasons for this change principles of Community law: do not emerge either from the preamble (a) the duty to state the reason on to Regulation No 1862/76 or from the which regulations are based (Article recitals in the preamble to or the 190 of the Treaty); provisions (in particular those of Article (b) the prohibition of any discrimi 11 (3)) of Regulation No 2727/75 to nation between producers within the which the recitals of Regulation No Community (second subparagraph 1862/76 refer. of Article 40 (3) of the Treaty); The plaintiff draws the conclusion that (c) the principle of legal certainty; Regulation No 1862/76 does not (d) the prohibition of abuse of powers. sufficiently sute the reasons on which it is based since it does not set out the whole of the circumstances which led to

and void. No 1862/76 makes a distinction between isoglucose and the other end products of starch manufacture. It thus 2. Breach of the principle of equality of treatment for all Community citizens marks a departure from the policy which the Council and the Commission The plaintiff states that apart from the had hitherto consistently followed from fact that it is recognized as a general 1967 onwards inasmuch as no principle of law, the rule of non-dis distinction was made as regards the crimination is inter alia enshrined in the application of production refunds in Treaty, as far as agriculture is respect of any of the products of starch concerned in Article 40 (3), which manufacture. provides that any discrimination

In his opinion on the milk-powder cases of assistance to the sugar industry. This (Cases 83 and 94/76, 4 and 15/77, 114, may be clearly deduced from Regu­ 116, 119 and 120/76) Mr Advocate lation No 1111/77 which imposes a General Capotorti expressed himself as production levy on isoglucose manufac­ turen. follows as regaras discrimination referred to in the second subparagraph If the Council and the Commission felt of Article 40(3): it necessary to adopt measures for the "The question of discrimination within protection of the sugar industry they the meaning of that provision concerns could have done so in all sorts of ways the relationship between persons who, by modifying the system applicable to apart from belonging to the same sugar. On the other hand they had no category (that of producers or that of right to interfere in a discriminatory consumers) are engaged in the same manner with the production refunds activity or in similar or competing system applicable to starch products and activities" ([1977] ECR 1230). thus to commit a breach of legal The distinction made by Regulation No certainty. 1862/76 between starch producers by The plaintiff takes the view that the placing starch producers manufacturing questions referred to the Court by the isoglucose in a special category, College van Beroep voor het constitutes a discrimination within the Bedrijfsleven call for the following meaning of Article 40 (3) of the Treaty. answers: All starch producers are in fact part of 1. The statement of the reasons on the same category and carry on the same activities or at least similar or which Article 2 of Council Regu­ competing activities. lation No 1862/76 are based is not in conformity with Article 190 of the 3. The principle of legal certainty Treaty, with the result that Article 2 — Article 5a of Regulation No The plaintiff points out that the sudden 2742/75 of the Council — has no change of policy revealed in Regulation binding effect. No 1862/76 is a breach of the principle of legal certainty. In fact it emerges 2. Anide 2 of Council Regulation No from an analysis of the policy of the 1862/76 is contrary to the principle Council and of the Commission in the of non-discrimination which is one matter of production refunds for starch of the foundations of the Treaty and production that the production refund which finds expression in particular system already figured in the first regu­ in Article 40 thereof. lation in 1967 on the organization of the markets in cereals and that the 3. The modification of the system for system has remained in force without the grant of refunds as regards starch modification until the summer of 1976 production, as effected by Regu­ without any indication to the starch lation No 1862/76 is contrary to the industry that it was possible for the principle of legal certainty which is system to be modified in a discrimi­ one of the foundations of the Treaty. natory manner. 4. In adopting Regulation No 1862/76 and Regulation No 2158/76 the 4. Misuse of powers Council and the Commission According to the plaintiff the respectively were guilty of a misuse modification in the system of of powers.

the questions relating to the validity of differently unless differentiation is Regulation No 1862/76. objectively justified (paragraph 17 of the decision). Comparability of situations 1. Lack of statement of reasons might appear in particular from the fan that the products, one of which has the As this regulation is part of a complex benefit of a Community aid whilst the of regulations the statement of the other does not, may be substituted one reasons on which it is based must be for the other for the purposes of their assessed, according to the Council, in application (paragraph 18 of the the context of that complex (cf. Case decision). It is common ground that the 78/74, Deuka v Einfuhr- und two products (isoglucose and glucose) Vorratsstelle Getreide [1975] ECR at p. which the plaintiffs claim are being 431. subjected to discriminatory treatment The complex of which Regulation No under Regulation No 1862/76, are not 1862/76 forms part is principally products which may be substituted one constituted by the basic cereals Regu­ for another for the purposes of their lation No 2727/75, the basic rice Regu­ application. lation No 1418/76 and Regulation No Even if it were possible for isoglucose 2742/75 on production refunds in the and certain other products of the starch cereals and rice sectors. It appears from industry to be substituted one for the statement of the reasons on which another, the different treatment of this complex of regulations is based that isoglucose is justified in particular by the primary objective of production the objective fact that that product does refunds is to eliminate the disadvantages not suffer competition from chemical sub­ in respect of the cost price relating to stitution products and that hence there is the raw material which as far as the no ground for subsidizing the raw starch production industry is concerned materials on which the product is based. is the result of the common agricultural policy, so as to permit that industry to 3. Breach of the principle of legal maintain competitive prices as against the certainty prices for chemical substitution products. The Council claims that it is quite The Council therefore took the view, impossible to take the view that the when it expressed as it did the reasons above-mentioned principle requires that on which Regulation No 1862/76 was an advantage once granted can never be based, that isoglucose was a product not eliminated or even modified so that, for in competition with chemical sub­ example, account could never be taken stitution products and that hence the of a change in the conditions and reason for the application of refunds for circumstances on the basis of which the the prod ucts in question, in so far as advantage was granted. In this

connexion and having regard to the submissions are essentially the same as optional nature of refunds and the those which it submitted with regard to discretion vested in the Council by the same submissions in Case 103/77 virtue of Regulation No 2742/75, a (Royal Scholten-Honig (Holdings) Ltd, v review by the Court should be limited Intervention Board for Agricultural to an appreciation of whether an overt Produce). error or a misuse of powers was to be imputed to the Community authorities. 3. Breach of the principle of legal It is only in this context that the certainty (third question) concept of an "acquired right" or of the The Commission points out in protection of legitimate expectation particular that Regulation No 2727/75, could play a part, namely to afford the basic regulation for cereals, does not protection by virtue of the principle of grant starch producen the right to legal certainty. continue to benefit from production First of all it should be noted that an refunds. In fact, Article 11 of the said acquired right in the maintenance of a regulation is limited to declaring that set of rules has never been recognized such a refund may be granted. Regu­ lation No 1862/76 cannot therefore by the Court. On the other hand, a legitimate expectation in the main­ amount to disregard either of acquired tenance of the system of refunds is rights on the pan of starch producen to countered by the optional nature of the the maintenance of the system in favour system and the margin of discretion of starch processed into isoglucose or of which the system vests in the Council. the legitimate expectation of such traden that the said system would be maintained. 4. Misuse of powers The production refund as far as 4. Misuse of powers (fourth question) isoglucose is concerned does not comply Referring to the case-law of the Court with the principal objective of the (in particular its judgment in Case 1/54, refund system. According to the Government of the French Republic v Council misuse of powers might rather High Authority [1954-1956] ECR) the be found if such refunds were to be Commission points out that there is a maintained in any conceivable circum­ misuse of powers when an authority stances. uses its legal powers to attain an objective other than that for which the In conclusion the Council suggests that the Court should reply to the College powers were granted. van Beroep voor het Bedrijfsleven that It would be difficult to criticize the consideration of the questions raised has Council on the ground that, when it disclosed no well-founded objections to adopted the implementing provisions for Regulation No 1862/76. Article 11 of Regulation No 2727/75 and the amounts of the refunds it had

5. Fifth question as to affect the validity of Regulations Nos 1862/76 and 2158/76." This question clearly relates to the question of the retroactive nature of Regulation No 2158/76. The regulation is not retroactive in itself. In fact Article III — Oral procedure 5a (3) of Regulation (EEC) No 2742/75, as amended by Article 2 of At the hearing on 24 May Koninklijke Regulation No 1862/76, which entered Scholten-Honig N.V., represented by into force on 1 August 1976, states that D.J. Gijlstra of the Amsterdam Bar and the Member States shall recover the M. Waller, the Council of the European difference between the production Communities, represented by its Agent, refunds for starch paid in 1976/77 and Daniel Vignes, assisted by A. Brautigam the unmodified refunds for 1975/76 and D. G. Lawrence, members of its applicable to starch intended for the Legal Department, and the Commission manufacture of isoglucose. of the European Communities, Conclusion represented by its Agents, J. H. J. The Commission submits that the Bourgeois and R. Wainwright, assisted by H. Bronkhorst and J. Delmoly, questions referred to the Court by the College van Beroep call for the members of its Legal Department, following answer: presented oral argument. "Consideration of the questions raised The Advocate General presented his has disclosed no factors of such a kind opinion at the hearing on 20 June 1978.

Decision

1 By a decision of 12 October 1977, which was received at the Court on 19 October 1977, the College van Beroep voor het Bedrijfsleven, pursuant to Article 177 of the Treaty, referred to the Court of Justice various questions concerning the validity of Council Regulation (EEC) No 1862/76 of 27 July 1976 amending Regulation (EEC) No 2742/75 on production refunds in the cereals and rice sectors (Official Journal 1976, L 206, p. 3) and also the validity and interpretation of Commission Regulation (EEC) No 2158/76 of 31 August 1976 laying down rules for the application of Regu­ lation (EEC) No 2742/75 (Official Journal 1976, L 241, p. 21).

6 According to the ninth recital in the preamble to Regulation (EEC) No 2727/75 of the Council of 29 October 1975 on the common organization of the market in cereals (Official Journal 1975, L 281, p. 1): "In view of the special market situation for cereal starch, potato starch and glucose produced by the 'direct hydrolysis' process it may prove necessary to provide for a production refund of such a nature that the basic products used by this industry can be made available to it at a lower price than that resulting from the application of the system of levies and common prices".

7 Article 11 (1) of the regulation provides that a production refund "may be granted :

(a) for maize and common wheat used in the Community for the manu­ facture of starch;

(b) for potato starch ;

(c) for maize groats and meal used in the Community for the manufacture of glucose by direct hydrolysis."

8 Under Article 11 (3) the Council, acting by a qualified majority on a proposal from the Commission, is to adopt rules for the application of the article and fix the amount of the production refund.

12 According to that article the amount of the refund for starch processed into that product is maintained at the level of that of the previous marketing year and is abolished as from the 1977/78 marketing year.

13 Under the new Article 5a (3) the difference between the amount of the production refund for starch processed into glucose having a high fructose content and the amount for starch used for any other purpose is to be recovered by Member States from manufacturers.

14 Therefore, in the case of products used subsequently for the manufacture of glucose having a high fructose content, Article 2 of Regulation No 1862/76 by using the expedient of "recovery" in fan refused the increase in the production refund for the 1976/77 marketing year and abolished it as from the following marketing year.

JUDGMENT OF 25. 10. 1978 — CASE 125/77

15 The Commission by enacting Regulation No 2158/76 adopted certain provisions for implementing the new Article 5a of Regulation No 2742/75.

16 Pursuant to Article 4 of Regulation No 2158/76 those provisions entered into force on 3 September 1976 and were applicable as from 1 August 1976.

KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN

22 That reference to the purposes of the refund system, which moreover are well known to the circles concerned, satisfies the requirement under Article 190 of the Treaty for a statement of reasons and thus the validity of Regu­ lation No 1862/76 cannot be challenged on those grounds.

23 The national court in its second question asks whether Article 2 of Regu­ lation No 1862/76 is incompatible with the principle of non-discrimination which is fundamental to the Treaty and which is set out in particular in Article 40 of the Treaty and whether Article 2 of the regulation is for that reason invalid.

24 Koninklijke Scholten-Honig N.V., the only one of the plaintiffs which has submitted observations, lays particular stress on the fan that when Regu­ lation No 1862/76 puts manufacturers of starch for the production of isoglucose into an exceptional situation, it discriminates between the latter and the manufacturers of starch for other purposes.

25 The second subparagraph of Article 40 (3) of the Treaty provides that the common organization of agricultural markets "shall exclude any discrimi­ nation between producers or consumers within the Community".

26 The prohibition of discrimination laid down in the above-mentioned provision is mereley a specific enunciation of the general principle of equality which is one of the fundamental principles of Community law.

32 Hence Article 2 of Regulation No 1862/76 does not infringe the rule of non-discrimination between Community producers set out in the second subparagraph of Article 40 (3) of the Treaty.

33 The national court asks in the third question whether the alteration effected by Regulation No 1862/76 in the system of granting refunds to the starch industry is incompatible with the principle of legal certainty, and, if so, whether the said regulation is in whole or in part invalid, in so far as it makes provision for the said alteration.

34 The plaintiff company referred to above lays particular stress on the fact that the sudden change of policy effected by Regulation No 1862/76 conflicts with the principle of legal certainty.

35 It claims that in fact the system of production refunds dates back as far as Regulation No 120/67 of the Council of 13 June 1967 (Official Journal, English Special Edition 1967, p. 33), which was the first regulation on the common organization of the market in cereals, and that it has remained in force without being amended until the adoption of Regulation No 1862/76 without the Community authorities' having given any indication that there might be a change of policy as far as the granting of refunds is concerned.

36 It is stated that some of the starch manufacturers, relying with legal jus­ tification on the maintenance of this policy, have invested capiul in the manufacture of isoglucose even before Regulations Nos 2727/75 and 2742/75 were adopted.

KONINKLIJKE SCHOLTEN-HONIG v HOOFDPRODUKTSCHAP VOOR AKKERBOUWPRODUCTEN

43 In formulating the Common Agricultural Policy the institutions are entitled to take account of the interplay of different markets.

44 Therefore the Council and the Commission could lawfully take into consideration the risk that production refunds in respect of starch for the manufacture of isoglucose might disturb the sugar market, although the said refunds did not appear to be necessary for attainment of the objectives of the organization of the market in cereals.

JUDGMENT OF 25 10. 1978 — CASE 125/77

45 There can therefore be no question of a misuse of powers on the pan of the Council or the Commission.

46 Commision Regulation No 2158/76, pursuant to Article 4 thereof, entered into force on 3 September 1976 but was applicable as from 1 August 1976.

47 The fifth question asks whether, having regard to this fact, Article 4 of Commission Regulation No 2158/76 must be interpreted as meaning that, taking account of the provisions of Regulation No 1862/76, those funds in respect of the manufacture of glucose with a high fructose content which were granted in the period from 1 August to 3 September 1976 may be recovered on the basis of the provisions of Regulation No 2158/76 and of those of Regulation No 1862/76, and, if so, whether it must follow that Regulation No 2158/76 is invalid in whole or in part, namely in so far as it makes provision for the recovery of refunds as mentioned above.

52 The costs incurred by the Council of the European Communities and the Commission of the European Communities which have submitted obser­ vations to the Court are not recoverable.

53 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 pending before the national court, the decision as to costs is a matter for that court.

On those grounds, THE COURT

in answer to the questions referred to it by the College van Beroep voor het Bedrijfsleven by a decision of 12 October 1977, hereby rules:

1. Consideration of the questions raised has disclosed no factor of such a kind as to affect the validity of Council Regulation (EEC) No 1862/76 of 27 July 1976 and Commission Regulation (EEC) 2158/76 of 31 August 1976.

2. By virtue of Article 4 of Regulation (EEC) No 2158/76 in conjunction with Articles 2 and 3 of Regulation (EEC) No 1862/76 the provisions of Regulation (EEC) No 2158/76, which lay down detailed rules for the recovery of production refunds paid for the manufacture of isoglucose, apply to refunds paid in the period from 1 August 1976 to 3 September 1976.