C-72/79

APPLICATION under Article 169 of the EEC Treaty for a declaration that the Italian Republic, by deciding to reimburse sugar manufacturers certain storage costs for the 1976/77 and 1977/78 marketing years, has failed to fulfil its obligations under Articles 8 and 31 (2) of Regulation (EEC) No 3330/74 of the Council of 19 December 1974 on the common organiz­ ation of the market in sugar (Official Journal 1974, L 359, p. 1),

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T H E COURT,

composed of: H. Kutscher, President, A. O'Keeffe and A. Touffait (Presidents of Chambers), J. Mertens de Wilmars, P. Pescatore, Lord Mackenzie Stuart, G. Bosco, T. Koopmans and O. Due, Judges, Advocate General: H. Mayras Registrar: J. A. Pompe, Deputy Registrar gives the following

JUDGMENT

Facts and Issues

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carried forward an amount cor- forward an amount corresponding to responding to 60% of the monthly 60% of the monthly amount fixed amount fixed by the Community under by the Community within the the arrangements for compensating framework of the system for storage costs, has infringed Articles 8 reimbursement of storage costs, has and 31 (2) of Regulation No 3330/74 on infringed Articles 8 and 31 (2) of the common organization of the market Regulation No 3330/74 on the in sugar". common organization of the market in sugar; The Italian Republic was consequently invited to adopt the necessary measures — Order the defendant to pay the costs. to comply with the reasoned opinion within a period of three months from its notification. The defendant contends that the Court should: No such measures were adopted within the period laid down. On 12 February — Declare that the application, in so far 1979 the Italian Republic sent the as it relates to the alleged Commission a letter in which it main- infringement of Article 8, is tained that the national measures were inadmissible or, in the alternative, not contrary to the relevant Community unfounded; provisions. — Dismiss the application in so far as it concerns the alleged infringement of The Commission instituted these pro- ceedings on 2 May 1979. Article 31 (2) of the said regulation;

— Order the applicant to pay the costs. On hearing the report of the Judge- Rapporteur and the views of the Advocate General, the Court decided to open the oral procedure without any III — Submissions and argu- preparatory inquiry. m e n t s of the p a r t i e s

letter of 23 March 1977 (cf. above, I The defendant considers that Article 8 of (c)), considered that the national Regulation No 3330/74 requires the measures in question constituted aids. Member States to reimburse sugar manu­ facturers' storage costs at a flat rate, by an amount which is to be the same for The defendant accordingly considers that the entire Community. the adoption of the procedure under Article 169 of the Treaty is premature since the procedure under Article 93 (2) The entire legislative content of the of the Treaty has not yet been initiated. relevant part of Article 8 consists in the imposition of this positive obligation on the Member States. According to the defendant the measures of the Price Committee provide primarily for the allocation of the reimbursement In particular the provision does not add to granted by Article 8 of Regulation No the obligation to reimburse the costs a 3330/74. The supplement provided for in specific prohibition on all aids by Member the national measures constitutes a States intended to compensate for any measure of a different nature which heavier charges. It is furthermore under­ cannot be interpreted under Article 8 but standable that Article 8 should not can only be appraised in the light of expressly provide for such a prohibition Article 92 of the Treaty and in in view of the general prohibition accordance with the procedure pre­ contained in Article 92, the provisions of scribed in Article 93 (2). which are expressly declared by Article 41 of Regulation No 3330/74 to apply to the common organization of the market in sugar. The applicant considers that a national aid for the benefit of agricultural products coming under a common In those circumstances a Member State organization of the market is in any which grants aids to compensate for event incompatible with the common heavier charges concerning storage costs market if it infringes the provisions of may infringe the prohibition set out in the Treaty other than those of Article 92 Article 92 of the Treaty but it does not or of secondary rules of law such as directly infringe Article 8 of the basic those governing the common organiz­ regulation which does not in fact contain ation of the market (judgment of 26 June any prohibition on aids in the title in 1979 in Case 177/78, Pigs and Bacon question. Commission ν McCarren [1979] ECR 2161; judgment of 13 March 1979 in Case 91/79, Hansen [1979] ECR 935). It It follows from the foregoing that the follows that a measure of this nature legality of the Price Committee decisions may be considered within the framework can only be appraised within the both of the procedure laid down in framework of Article 92 of the Treaty Article 93 and of the procedure under and in accordance with the procedure Article 169. laid down in Article 93.

Article 38 of Regulation No 3330/74, as of the adoption of the Price Committee subsequently amended. decision. In the form which it had at the time Article 8 of Regulation No 3330/74 was adopted on 22 June 1976 Substance (as amended by Regulation No 1487/76, (Official Journal 1976, L 167, p. 9)) and the Price Committee decision dates from The applicant claims that the measure 1 October 1976. enacted by the Italian Republic (in paragraphs 5 (e) and 5 (f) of the two The defendant claims that the objective Price Committee decisions) infringes of Article 8 is to stabilize the market by Article 8 of Regulation No 3330/74 avoiding general and immediate recourse since it does not observe either the to intervention conditions and to the principle of reimbursing storage costs at immediate sale of the products. The a flat rate or the principle whereby "the Italian measure conduces to the amount of the reimbursement shall be attainment of the objective referred to in the same for the entire Community". On Article 8 by preventing sugar produced the one hand the compensation is in fact in Italy from reaching the intervention calculated each month in terms of the agencies in its totality and at once, in variations in the financial burdens of the view of the high storage costs resulting processing industry; on the other that from an increase in the financial charges. compensation is in addition to the Community reimbursement, thereby infringing the rule that the reim- The national measures of support are bursement shall be the same for the explained by the handicap suffered by entire Community. Italian producers through the higher charges linked to storage. Using the information provided by the application The applicant maintains that the system of the arrangements for flat-rate of compensating for the storage costs of reimbursement provided for in Article 8 sugar was set up and organized on the of Regulation No 3330/74 Italy grants basis of Community regulations. In the support intended to eliminate or reduce application of such provisions by the the above-mentioned handicap. Member States the national authorities may not modify their structure or effect. In this connexion no decision has been taken by the Community authorities on A Member State may not amend by the ground that Article 8 of Regulation national measures the appraisal of the No 3330/74 is not intended to reimburse economic circumstances which vary at storage costs. different times and from country to country, as such an appraisal forms the The Commission has now changed its basis of the solution adopted at attitude and relies upon the prohibition Community level. The Treaty contains contained in Article 8 in order to contest the instruments and guarantees for the a measure which, according to the view proper adjustment of Community which it previously took, fell clearly legislation to changed circumstances. outside the scope of the said Article 8.

The extension of the "aid" to imported The applicant considers that the nature sugar after the 1978/1979 sugar year (in and objectives of the Italian measure are accordance with the Price Committee identical to those of the reimbursement Decision of 26 May 1978, Gazzetta effected under Article 8, as is shown by Ufficiale No 159) shows that the support the content of the national provisions in question constitutes an aid intended to and by the method of calculation used to offset the higher storage costs. It does determine the contribution in question. not depart from the objective referred to in Article 8 of Regulation No 3330/74. The quantitative difference between the costs borne by the sugar producers constitutes a factor which could not be The applicant, in its reply, states that taken into consideration precisely Article 8 is intended to ensure a regular because of the decision of the supply of sugar throughout the sugar- Community legislature to grant a flat- marketing year. Strictly interpreted, so rate reimbursement identical for all the far as it derogates from the prohibition Member States. on aids the article lays down exhaustive provisions concerning the whole system of contributions to the cost of storing The applicant maintains that the Member sugar regardless of the nature and States cannot take measures which are objectives thereof and whatever may be intended to supplement a Community the factors which determine the costs. If provision or modify its scope. this were not so it would be impossible to explain the reference in that provision to Article 31 (2) which governs any reimbursements of storage costs which The defendant maintains that Article 8 differ as to their origin, nature and does not prohibit compensation by means of national aids for heavier objectives from those of storage costs in charges relating to storage. general. If the Community legislature had not intended that Article 8 should be a principal rule of a general nature it would not have been necessary to make The defendant provides further details in express provision in the body of that addition to the differences set out in the article for a case which, by its origin, statement of defence, namely that the nature and objective was in no way national measure is financed from State connected with it; the provision in funds whilst the system of compensation Article 31 would have been sufficient by provided for in Article 8 of Regulation itself. No 3330/74 is financed from contri­ butions paid by sugar manufacturers themselves.

The applicant considers that the national Pursuant to Article 2 of Regulation No measure is consequently at variance with 748/68 the sugar manufacturer may Article 31 (2) of Regulation No 3330/74 require the beet producer to reimburse and cannot be considered as authorized storage costs in respect of sugar carried by the provisions of Article 2 of Regu- forward on the basis of a contract or lation No 748/68. within the limits fixed by the Community institutions. The defendant claims that the decisions of the Price Committee merely authorize According to the Italian Republic the Sugar Equalization Fund (an agreements to that effect were concluded administrative agency) to reserve a share between representatives of the beet of the adaptation aids already recognized producers and sugar manufacturers for and allocated to beet producers. These the two marketing years 1976/77 and decisions then authorize the Fund to pay 1977/78 which was confirmed in the to the sugar manufacturers concerned for inter-trade agreements for those two the account of the beet producers an years. The content of these agreements amount corresponding to 60% of the was then adopted in Articles 6 (a) of the monthly Community amount not Price Committee decisions. reimbursed for storage expenses for the entire production of surplus sugar not qualifying for that reimbursement, to be set against the reserved share. The Fund The .applicant nevertheless observes that keeps separate books for the fund in this matter the inter-trade agreements formed by the expedient of the reserve. are not by themselves binding on all producers. The producers are free to apply the clauses provided on this point Those provisions as a whole indicate that by the agreements or to arrange their the two Price Committee decisions are affairs otherwise. The inter-trade solely intended to authorize the agreement does not thus constitute by Equalization Fund, acting as the agent of itself the contractual basis prescribed in the beet producers, to manage a fund Article 2 of Regulation No 748/68. formed through the reserve obtained from the sums allocated to the beet producers. It accordingly does not It is thus the intervention of the State constitute an operation for the account agencies which must be considered of the State.

The share of the adaptation aids central administration participate. Such a concerning beet was allocated entirely to practice has already been held improper the beet producers who enjoyed it by the Italian Constitutional Court without restrictions. Of these sums the (Judgment No 35 of 9 to 24 June 1961, beet producers permitted, through (Foro Italiano, I, 1051)). With regard to obligations undertaken in the context of the present proceedings the Italian inter-trade agreements and private Republic is adopting the same method contracts which referred to such with this system of the inter-trade agreements, the reservation of a share agreement, the content of which forms from the special fund and its an integral part of the Price Committee management for their own account by measures. Thus it imposes on all beet the Equalization Fund. producers a charge enabling producers' storage costs for sugar carried forward to be met whilst such producers are thus excepted from the need for negotiations The two Price Committee decisions thus covered exclusively by private law and cannot be considered as measures their attendant risks. constituting the obligation to make a reimbursement imposed upon the beet

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— Do not belong to trade organiz- The infringement with which the Italian ations; or Republic is charged is that of having paid to producers of sugar carried forward an — Might (but for the decisions of the amount corresponding to 60% of the Price Committee) put forward monthly amount fixed by the objections based on private law Community within the framework of the against the reimbursement or the arrangements for reimbursing storage fixing of its amount at the maximum costs. This means that such reim- authorized level, bursement is effected by a measure for the payment effected automatically by which its own agencies were liable and the Fund certainly does not constitute with State resources. Accordingly the performance of a legal mandate questions concerning the efficacy of the conferred by the person concerned but inter-trade agreement and the on the contrary is the fulfilment of a compatibility of its content with Regu- legal obligation imposed by the Price lation No 748/68 fall outside the Committee. framework of this action. Thus the reference to the case-law of the The two decisions of the Price Italian Constitutional Court is in fact Committee impose upon all beet irrelevant. producers (whether or not their beet is used for the production of sugar which is According to the defendant's infor- carried forward) the burden of the credit mation all the individual contracts for reserved by the Fund for the financing of the sale of sugar-beet to the sugar manu- the reimbursement in question. facturers contain a clause referring to the The defendant, in its rejoinder, maintains inter-trade agreement. that the reserve of Lit 300 and the deduction of that amount from the aid paid to beet producers are not imposed by the decision of the Price Committee IV — O r a l p r o c e d u r e but are based on the inter-trade agreement. The Equalization Fund must credit the beet producers with the At the sitting held on 6 December 1979 interest on the sums transferred to the parties presented oral argument. reserve, it must collect an amount for the management of the special fund and The Advocate General delivered his reimburse any surplus from that fund to opinion at the sitting on 24 January the beet producers. 1980.

4 The Commission claims that through Decision No 24/1976 of the Comitato Interministeriale dei Prezzi [Inter-departmental Price Committee, hereinafter referred to as "the Price Committee"] (Gazzetta Ufficiale N o 264 of 4 October 1976, p. 7201) the Italian Government decided to grant to the sugar-processing industry a compensatory allowance corresponding to the difference between the financial charges borne by that industry for the storage costs of sugar produced in Italy and the amount of the reimbursement fixed by the Community provisions. The above-mentioned decision states that any adjustment of that latter amount is to entail a corresponding adjustment of the compensatory allowance. That decision, which applied to the 1976/77 marketing year, was replaced by a similar decision for the 1977/78 marketing year (Decision No 37/1977 of the Price Committee, Gazzetta Ufficiale No 207 of 29 July 1977, p. 5678).

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5 According to the Commission these decisions infringe Article 8 of Regulation No 3330/74. On the one hand they fail to observe the principle of flat-rate reimbursement since the compensatory allowance for which they make provision is calculated in terms of variations in the financial burdens of the processing industry. On the other hand they are contrary to the rule that the reimbursement shall be the same for the entire Community since the compensatory allowance is in addition to the Community reimbursement.

6 Article 31 (1) of Regulation No 3330/74 provides that, in certain cases, undertakings may carry forward a specified part of their production which is outside the basic quota to the following marketing year, to be treated as part of that year's production. Article 31 (2) adds that the quantity carried forward must be kept in store from 1 February to 31 January of the following year and that storage costs for that period shall not be refunded under the provisions of Article 8.

Admissibility

10 According to the Italian Government the supplementary reimbursement of the storage costs of sugar produced in Italy in accordance with the decision of the Price Committee is intended to compensate for the differences between the financial charges for storage which the processing industry in Italy must bear and those which are taken into consideration within the framework of reimbursement measures at Community level. Accordingly the supplementary national measures must be classified as aids within the meaning of Articles 92 and 93 of the EEC Treaty. In those circumstances the compatibility of those national measures with the provisions of the Treaty and with those laid down for the implementation of the common agricultural policy may only be appraised in accordance with the procedure provided for in Articles 92 and 93 of the Treaty and the criteria laid down therein.

1 1 The Italian Government further claims that the Commission recognized both in the procedure before the matter was referred to the Court and in its application initiating proceedings that the national measures in question constitute aids within the meaning of the Treaty. As the Commission has not instituted the procedures referred to in Article 93 of the Treaty this application based on Article 169 of the Treaty is alleged to be premature and accordingly inadmissible.

12 These two arguments cannot be upheld. The Commission rightly maintains that the Council is entitled to lay down, within the context of the regulations establishing the common organization of the markets in agricultural products, provisions prohibiting wholly or partially certain forms of national aids for the production or marketing of the products in question and that an infringement of such a prohibition may be dealt with within the specific framework of such an organization. In fact the existence of the special procedure laid down in Article 93 of the Treaty for appraising the

1 4 The Italian Government admits that Article 8 of Regulation No 3330/74 makes provision for a flat-rate, uniform reimbursement of storage costs. Nevertheless that provision must, it claims, be interpreted in the light of its objective, which is to stabilize the market. If the storage costs were not refunded the products in question would in fact be placed on the market immediately or sold to intervention agencies, a situation which would be liable to cause imbalance of the market. The basic regulation has as its objective the adoption of measures appropriate to stabilizing the market. The Italian Government recalls that, according to the recitals in the preamble to the regulation, that objective may be attained by intervention arrangements as well as by a system compensating for storage costs. The granting of a supplementary compensatory allowance by the Italian authorities is intended to attain the same objective. Far from being contrary to the Community system, that grant thus contributes to its proper operation.

15 The Commission disputes that point of view. It considers that the nature and objective of the compensatory allowance in dispute are identical to those of the refund effected pursuant to Article 8 of the regulation. That provision is to be narrowly interpreted because it constitutes an exception to the general prohibition on aids; it is intended to lay down exhaustive rules for the entire system of contributions to storage costs.

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16 It is the case that the system of compensation for storage costs for sugar laid down by Regulation No 3330/74 was conceived in order to attain the objectives of that regulation which include inter alia the stabilization of the market in sugar. By establishing a uniform flat-rate refund for the whole Community, the amount of which is fixed annually by the Community institutions, the regulation however states that these objectives must be attained in the same way in all Member States.

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credit or of a special fund a share of the adaptation aids granted to beet producers and then to grant a reimbursement to the sugar manufacturers concerned, for the account of such producers. The levy from the aids intended for beet producers, the setting up of the special fund and the partial reimbursement to sugar manufacturers of the storage costs of sugar carried forward were not laid down by the decisions of the Price Committee but by inter-trade agreements between the organizations representing the sugar industry and those representing the beet producers. The Italian Government recalls in this connexion that Article 2 of Regulation (EEC) No 748/68 of the Council of 18 June 1968 laying down general rules for postponing part of the sugar production to the following marketing year (Official Journal, English Special Edition 1968 (I), p. 129) enables sugar manufacturers to require beet or cane sellers to bear part of the storage costs where sugar is carried forward to the following marketing year.

21 The Commission admits that the resources required by the reimbursement in question do not come from the State budget. Nevertheless it maintains that the special Fund set up to pay for the reimbursement is financed by a specific charge laid down pursuant to the measures adopted by the Price Committee. The inter-trade agreement to which reference is made form part of a system of administrative procedures resulting in a body of decisions which are binding on all sugar manufacturers and beet producers. In those circum- stances the Commission claims that the participation of the beet producers is not voluntary since the financial charge in question is imposed upon them.

25 In those circumstances the partial reimbursement of the storage costs for sugar carried forward cannot be considered as the voluntary participation of beet producers in the storage costs for the purpose of Article 2 of the said Regulation No 748/68. On the contrary that reimbursement must be defined as a special means of aid in the sugar sector organized by the Italian public authorities and at variance with Article 31 (2) of Regulation N o 3330/74 which must be understood as prohibiting the Member States from reimbursing the storage costs of sugar where it is carried forward to the following marketing year.

26 It must thus be declared that the Italian Republic, by granting to sugar producers for the 1976/77 and 1977/78 marketing years a partial reimbursement of the storage costs of sugar carried forward to the following marketing year, has failed to fulfil one of its obligations under the Treaty.

Costs

27 Pursuant to Article 69 (2) of the Rules of Procedure the unsuccessful party shall be ordered to pay the costs.

28 Since the defendant has failed in its submission it must be ordered to pay the costs.

JUDGMENT OF 24. 4. 1980 — CASE 72/79

Kutscher O'Keeffe Touffait Mertens de Wilmars Pescatore

Mackenzie Stuart Bosco Koopmans Due

Delivered in open court in Luxembourg on 24 April 1980.

A. Van Houtte H. Kutscher Registrar President