C-77/79

FONDS D'ORIENTATION ET DE RÉGULARISATION DES MARCHÉS AGRICOLES [Fund for the Guidance and Stabilization of Agricultural Markets]

on the interpretation of certain provisions of Regulation (EEC) N o 1975/69 of the Council of 6 October 1969 introducing a system of premiums for slaughtering cows and for withholding milk and milk products from the market (Official Journal, English Special Edition, Second Series, III, p. 38) and of Regulation (EEC) N o 2195/69 of the Commission of 4 November 1969 laying down detailed rules for the application of the system of premiums for slaughtering cows and for withholding milk and milk products from the market (Journal Officiel 1969, L 278, p. 6).

T H E C O U R T (First Chamber)

composed of: A. O'Keeffe, President of Chamber, G. Bosco and T. Koopmans, Judges,

Advocate General : J.-P. Warner Registrar: A. Van Houtte

gives the following

I — Facts and written p r o c e d u r e — The condition that the quantity of milk or milk products which has been disposed of during the 12 months preceding the appointed date cor- 1. On 6 October 1969 in order to responds to certain minimum levels reduce surplus milk production the (Article 7 (2) of Regulation No Council adopted Regulation N o 1975/69 1975/69). introducing a system of premiums for slaughtering cows and for withholding milk and milk products from the market, detailed rules for the application of The "appointed date" is to be which were laid down by Regulation No determined by each Member State within 2195/69 of the Commission of 4 a period which, at the time when the November 1969. The scheme was ended implementing Regulation N o 2195/69 in 1971 by Regulation No 1290/71 of was in force, ran from 1 September 1968 the Council. It was re-introduced in 1973 to 31 August 1969, or to 30 November and remained in force until 31 December 1969 for Italy (Article 14 (2) (a)). 1974. In 1977, by Regulation No 1078/77 of 17 May 1977 (Official Journal 1977, L 131, p. 1), the Council introduced a new system of premiums Under Article 8 of the basic Regulation for the non-marketing of milk and milk No 1975/69 the amount of the premium, products and for the conversion of dairy fixed at 200 units of accounts per dairy herds. That scheme is still in force. cow, is to be paid in five instalments, the first instalment of 100 units of account to be paid in the three months following submission of the written undertaking referred to above. The second subpa- 2. Under the basic Regulation No ragraph of Article 8 (2) provides that the 1975/69 and the implementing Regu- balance is to be paid annually in four lation No 2195/69 the grant of the equal instalments premium to farmers for withholding milk and milk products from the markets is subject in particular to: "if the recipient has satisfied the competent authority that the number of — An undertaking from the farmer to adult bovine units he holds is not less discontinue fully and finally the sale than the number of dairy cows held at of milk and milk products, including the date of making the application and disposal thereof free of charge, that the undertaking mentioned in within six months from the date of Article 6 has been fulfilled". the undertaking at the latest (Article 6 of Regulation No 1975/69 and Article 14 (2) (b) of Regulation No Article 11 of Regulation No 1975/69 2195/69); provides:

— Following the retirement for health On 8 April 1970, acting in the name and reasons of her tenant farmer, Angelo on behalf of Mrs Damas and M r Arbusti, Arbusti, and the installation of his the latter's son, Joseph Arbusti, entered son Joseph Arbusti in his place, and into the undertaking referred to in after having in fact converted the Article 6 of Regulation No 1975/69 to dairy herd to full-grown cattle she discontinue fully and finally the sale of had to discontinue all direct milk and milk products, including the involvement in the farm, sell the disposal thereof free of charge, within six cattle and let the property on a months at the latest from the date of farming lease dated 2 August 1971, entering into the said undertaking, taking effect retroactively from 1 namely 8 October 1970. November 1970;

Mrs Damas then received from the — Some of the livestock was sold, in Fonds d'Orientation et de Régularisation particular to Joseph Arbusti, who des Marchés Agricoles (hereinafter farmed another property on his own

DAMAS v FORMA

— Of the 21 dairy cows present on the farm in question on 8 April 1970 a On hearing the report of the Judge- number were transferred to the farm Rapporteur and the views of the of Joseph Arbusti. Advocate General, pursuant to Article 95 of the Rules of Procedure the Court assigned the case to the First Chamber. 4. By decision of 16 March 1979 the Conseil d'État stayed proceedings and pursuant to Article 177 of the EEC Treaty referred the following questions II — W r i t t e n o b s e r v a t i o n s s u b - to the Court of Justice : m i t t e d p u r s u a n t to A r t i c l e 20 of t h e P r o t o c o l on t h e S t a t u t e of t h e C o u r t of 1. Is the undertaking referred to in J u s t i c e of t h e E E C Article 6 of Regulation No 1975/69 of the Council and Article 14 of Regulation No 2195/69 of the Commission given by the farmer to Mrs Damas contends that it is unam- discontinue fully and finally the sale biguously clear from the relevant of milk and milk products of a Community provisions that the underr personal nature or does it attach to takings which she entered into are of a the property concerned and what are personal nature. the consequences, as regards the entitlement to the premium, of ' a disposal of the property or of the The wording of Articles 5 and 6 of right to farm the land? Regulation N o 1975/69 and Articles 12 (d) and 14 (2) (b) of Regulation No 2195/69, in which only the terms 2. Does the undertaking attach to the "farmers" and "recipients of the livestock and, if the dairy cows for premium" are used, leaves no doubt in which the premium was granted are this respect. With regard to the system of disposed of, is the seller's obligation premiums for withholding milk from the transferred to the buyer? market (in contrast to the system of

The purely personal nature of the under- Comparison of the system of premiums taking entered into by Mrs Damas in the for slaughtering cows with that of context of the contractual relations premiums for withholding milk from the between her and the FORMA is market makes it quite clear that in the evidenced further by the doctrine of former the obligation relates directly to privity of contract. As a general principle the livestock and that, to be effective, the of law recognized by the Member States system must transfer the obligation to that doctrine is an integral part of any purchaser thereof. In order to ensure Community law. Any transfer of the that the system is effective a certain obligation entered into by Mrs Damas to number of formalities are laid down: the a third party is inconceivable, parti- cows are all marked and accompanied by cularly as it could take the form of an an identity card at all stages up to assignment of debts, which is generally slaughtering; a purchaser must be prohibited. informed, prior to sale, of the use to which the cattle purchased by him are to be put. Finally, the interpretation set out above was shared by the French administration at the time of the facts giving rise to the The fact that none of those formalities is case. In a letter of 6 April 1970 to Mrs laid down in the system of premiums for Damas the Directeur Départemental de withholding milk from the market and l'Agriculture [Regional Director of Agri- also that the formalities laid down by culture] in fact informed her that the that system relate solely to the personal undertaking which she was about to sign activities of the farmer proves on the was "of an individual nature". contrary that the undertaking to withhold produce from the market is a purely personal undertaking. The FORMA observes first that the objective of Regulation No 1975/69 of the Council and Regulation N o 2195/69 With regard also to the question whether of the Commission is to bring about a the undertaking may attach to the reduction in the production of milk and

It is also in accordance with the objective — to discontinue fully and finally the of the said regulations that, apart from sale of milk and milk products; the exceptions referred to in Article 16 (2), the dairy cows kept at the time of submission of the application for the premium cannot, by means of assignment — to keep, on his farm, a number of to a third party, continue to be used for full-grown cattle equal to or greater the production of milk and milk products than the number or dairy cows held for marketing, and that consequently the on the day when the application is obligation on the recipient of the submitted. premium not to market the milk must necessarily be transferred to the purchaser of the dairy cows. T o decide otherwise would run counter to the aim If the recipient fails to comply with his of the regulations in question, which is obligations sanctions are laid down to reduce the numbers of dairy cows including the termination of payments producing milk for marketing. and the recovery of sums already paid if the recipient of the premium continues to sell milk, or the recovery of the first half of the premium if he fails to satisfy the The Commission of the European obligation to keep on his farm a Communities takes the view as regards minimum number of full-grown cattle. the first question that the recipient's undertaking by no means attaches to a given farm. The aim of the above-mentioned regu- lations presupposes that the undertakings entered into by the recipients of the That is clear from the sixth recital of the premiums attach to the property and not preamble to Regulation No 1975/69, to the person of the recipient. which merely refers to the farmer's personal undertaking, and Articles 6 and 8 (2) of that regulation which refer only The provisions of Article 16 of Regu- to recipients of the premium and lation N o 2195/69, as last amended by nowhere state that the undertaking also Regulation (EEC) No 2240/70 of the attaches to the farm. Commission of 4 November 1970 (Journal Officiel 1970, L 242, p. 12), which appear to be interpretative in That view is also confirmed by Article 5 nature, are evidence of this as they imply (2) of the regulation as amended by that a successor in title to the farm must Regulation No 1386/70 (Official undertake vis-à-vis the competent Journal, English Special Edition, Second authority to continue to carry out the Series, III, p. 48) under which "any obligations entered into by his pre- successor to the farm may assume the decessor. That interpretation seems to be undertakings of his predecessor". If

therefore the new owner or tenant in 1973 the authors of Regulation N o farmer is not obliged to assume the 1353/73 (Official Journal 1973, L 141, p. undertaking on his own behalf it is clear 18) held that it was necessary to that the obligation does not attach to the reinforce the effectiveness of the system farm managed by the recipient of the and to facilitate controls and therefore premium at the time of the application. expressly linked the undertaking entered into by the recipient of the premium to the farm managed at the time of the application. As such an amendment to The same conclusions may be drawn legislation cannot have retroactive effect from Article 16 (1) of Regulation N o the interpretation of the former 2195/69 of the Commission as amended provisions so as to make their effect by Regulation N o 2240/70, which auth­ identical to the new rules is incorrect. orized the Member States to recover the amount referred to in the first subpa­ ragraph of Article 8 (2) of Regulation N o 1975/69 In any event, the fact must not be forgotten that as the undertaking is personal the recipient remains under an obligation to fulfil it, even if he has "if the recipient or his successor in title disposed of his farm or has assigned the to the farm who has undertaken vis-à-vis tenancy and his successor has not the competent authority to continue to assumed the undertaking. H e is therefore carry out the obligations entered into by still bound to respect both the obligation his predecessor, has not shown to the not to sell milk and the obligation to satisfaction of the competent authority keep a minimum number of full-grown that he keeps the number of adult bovine cattle. units referred to in the second subpa- ragraph of Article 8 (2) of Regulation (EEC) N o 1975/69". The second question of the national court asks precisely whether the obligation to keep a certain number of full-grown The farm is mentioned here solely to cattle attaches to the cattle and, if the cover the hypothesis that the successor dairy cattle for which the premium was has undertaken to continue to carry out granted are disposed of, whether the the obligations relating to the premium seller's obligation is transferred to the for withholding milk from the market. buyer. However, if the successor to the farm has not assumed that undertaking the amounts cannot be recovered from the Under the relevant provisions, namely recipient of the premium who has sold Article 8 of Regulation N o 1975/69, the the farm or who has assigned the right to recipient of the premium is not obliged work it in so far as he can show that he to continue to keep dairy cows which is continuing to carry out the obligations were the subject of the application and in referred to in Article 6 and Article 8 (2) respect of which the first instalment of of Regulation N o 1975/69. the premium has been paid. H e is obliged only to hold for a period of five years (see Article 11 of the regulation) a The interpretation set out above is, number of full-grown cattle corre- furthermore, the only one compatible sponding at least to the number of dairy with the amendments made to the rules. cows held at the date of making the In re-establishing the system of premium application.

That conclusion is also confirmed by following answers should be given to the Article 14 (2) of Regulation N o questions referred to the Court: 2195/69, which provides that the competent authorities are to determine "Regulation No 1975/69 of the Council, the number of dairy cows in respect of in particular Articles 6, 8 and 11, and which the premium may be granted but Regulation No 2195/69 of the which does not require the authority to Commission, in particular Articles 14 (2) mark the cows or to provide an identity and the first paragraph of Article 16, are card. to be interpreted as follows: The undertaking of the recipient of the premium does not therefore attach to — Entitlement to the premium for specific dairy cows. The cows in respect withholding products from the of which an application for a premium market is subject to compliance for a has been submitted can be sold by the period of five years with the under- recipient without this necessarily or auto- taking not to sell milk and to hold, matically leading to the transfer of the for the same period, a number of undertaking in question. full-grown cattle corresponding at least to the number of dairy cows in respect of which a premium has been If the purchaser of dairy cows does not granted; assume the undertaking laid down by the system of premiums, a recipient who wishes to retain the right to the premium — The undertaking entered into is must in any event keep the number of personal and does not at the same full-grown cattle in respect of which he time attach to the property, so that has given an undertaking. The Court has the disposal of the property or of the already had occasion to accept that right to farm the land has no direct interpretation in Case 84/76 (Collie v effect on entitlement to the premium; FORMA). — The undertaking entered into does In short, the premium for withholding not attach to specific animals, with milk from the market is subject to proof the result that the obligation is not that the obligations not to sell milk and automatically transferred to the to keep a certain number of full-grown purchaser of dairy cows in respect of cattle have been complied with for the which, at the time the application was whole of the specified period of five submitted, the premium for years. Those obligations may be satisfied withholding products from the by the recipient of the premium or by an market was granted." assignee who has voluntarily agreed to continue to carry out the obligations, but they do not attach to the farm of the recipient or the dairy cows held at the Ill — Oral procedure date of making the application. Disposal of the farm or of the dairy cows does not therefore entail the transfer of the obligations to the assignee or the The appellant in the main action, automatic loss of the predecessor's right represented by F. Kappelhoff-Lançon, of to the premium. the Bordeaux Bar, the FORMA, represented by P. Villey, of the Paris Bar, and the Commission of the Having regard to the foregoing the European Communities, represented by Commission takes the view that the J. Delmoly, a member of its ' Legal

3 Article 5 of Regulation N o 1975/69 provides that farmers having more than ten dairy cows may, on application, receive a premium for withholding milk and milk products from the market. Article 6 thereof provides that the granting of the premium shall be subject, in particular, to a written under- taking from the recipient "to discontinue fully and finally the sale of milk and milk products", including the disposal thereof free of charge, at the latest within six months of the date of the said undertaking. Article 7 of that regulation provides that the amount of the premium shall be 200 units of account per dairy cow kept on the farm at the date when the application is made and that the granting of the premium shall be restricted to the number of dairy cows on the farm managed by the recipient at an appointed date. Article 8 of the regulation, which deals with the procedure for paying the

DAMAS v FORMA

premium, provides that one half of the premium per dairy cow shall be paid in the three months following submission of the above-mentioned under- taking and the second subparagraph of Article 8 (2) further provides that:

"The balance shall be paid annually in four equal instalments if the recipient has satisfied the competent authority that the number of adult bovine units he holds is not less than the number of dairy cows held at the date of making the application and that the undertaking mentioned in Article 6 has been fulfilled".

In the event of one or other of the two above-mentioned conditions not being fulfilled, Article 11 of the regulation provides that:

5 In view of the argument put forward by the FORMA and challenged by the appellant, that the recipient of the premium continues to be bound by the undertaking which he gave if he disposes of the farm, the national court referred to the Court of Justice for a preliminary ruling the following questions:

1. Is the undertaking referred to in Article 6 of Regulation N o 1975/69 of the Council and Article 14 of Regulation N o 2195/69 of the Commission given by the farmer to discontinue fully and finally the sale of milk and milk products of a personal nature or does it attach to the property concerned and what are the consequences, as regards the entitlement to the premium, of a disposal of the property or of the right to farm the land?

2. Does the undertaking attach to the livestock and, if the dairy cows for which the premium was granted are disposed of, is the seller's obligation transferred to the buyer?

(a) The first question

6 In order to enable an answer to this question to be given to the national court the rules at issue must be examined, principally in the light of the main objectives which they seek to attain. The preamble to Regulation (EEC) No 1975/69 of the Council states that, since the situation in milk and milk products in the Community is one of surpluses, that regulation aims at encouraging the tendency of certain categories of farmers in the Community to abandon milk production or the marketing of milk and milk products and for those purposes introduces a premium for slaughtering dairy cows as well as a premium for withholding the said products from the market. Viewed in

7 Those basic features of the system in question were confirmed by Regulation (EEC) No 1386/70 of the Council of 13 July 1970 (Official Journal, English Special Edition, Second Series, III, p. 48) and also by implementing Regu- lation (EEC) N o 2240/70 of the Commission of 4 November 1970 which entered into force on 8 November 1970 (Journal Officiel 1970, L 242, p. 12). The former regulation, by introducing fresh provisions to cover the case of a successor to the farm or of force majeure, makes it quite clear in the first recital of the preamble thereto that the only circumstances which may justify non-compliance with the obligations undertaken by the recipient of the premium, as far as concerns the withholding of milk and milk products from the market, are those which are beyond his control, where the conditions for a case of force majeure within the meaning of Article 2 thereof are present. On the other hand, in the event of a farm passing to a successor, Article 1 of the same regulation, which has become Article 5 (2) of Regulation N o 1975/69 as amended, expressly states that the recipient is only entitled to keep the part of the premium paid in advance in so far as the successor in title undertakes to "assume the undertakings of his predecessor". Under Article 1 of Regulation (EEC) N o 2240/70 the successor's undertaking does not discharge the predecessor in title unless the former has given his under-

JUDGMENT OF 13. 2. 1980 — CASE 77/79

taking "to the competent authority". Those provisions make it absolutely clear that, apart from exceptional circumstances, which are beyond the control of the recipient, such as cases of force majeure, the concern to ensure that the system in question achieves its full effect, namely the withholding of milk and milk products from the market during the whole of the period under consideration, is the underlying, fundamental criterion which determines the conditions governing the grant of the premium and the absolute entitlement of the recipient to retain the payment on account.

9 As the Court emphasized in its judgment of 1 March 1977 in Case 84/76 Collie [1977] ECR 361, the aim of Regulation No 1975/69 is not only to discourage the marketing of milk and milk products but also at the same time to encourage recipients of the premium to use their milk production for rearing cattle intended for the production of meat and to exploit effectively the capacity of their farms, especially as far as the production of beef and veal is concerned. It is for the very purpose of attaining that objective that the second subparagraph of Article 8 (2) imposes upon the recipient the obligation to hold, during the period of five years over which the payment of the premium is spread, a number of adult bovine units not less than the number of dairy cows which he held at the date of making the application and which gave entitlement to the premium, and makes the payment by instalments of the balance of the premium conditional on compliance with that obligation.

DAMAS v FORMA

11 The answer to the second question must therefore be that the obligation upon the recipient of the premium to hold a number of adult bovine units not less than the number of dairy cows held at the date of making the application is not linked to specific animals. In the event of the disposal of the dairy cows which were held on the farm at the time when the application was made and which gave entitlement to the premium, the burden of the undertaking given by the recipient to withhold milk and milk products from the market does not pass to the buyer of those cows by virtue of that disposal.

Costs

The costs incurred by the Commission of the European Communities, which has submitted observations to the Court, are not recoverable. As these proceedings are, in so far as the parties to the main action are concerned, in the nature of a step in the action before the national court, the decision as to costs is a matter for that court.

JUDGMENT OF 13. 2. 1980 — CASE 77/79

On those grounds,

THE COURT (First Chamber),

A. Van Houtte A. O'Keeffe Registrar President of the First Chamber